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Men of Wealth 



John T. Flynn 

Simon and Schuster, New York 






I. FUGGER THE RICH: Organizer of Capitalism 3 

II. JOHN LAW : Money Magician 49 

III. THE ROTHSCHILDS: Imperialist Bankers 86 

INTERLOGUE ONE: 1. cosimo de’ medici 127 


IV. ROBERT OWEN: The Reformer 148 


VI. HETTY GREEN: The Miser 215 

INTERLOGUE TWO: 1. misers — 11. poverty 250 

VII. MITSUI: The Dynast 262 

VIII. CECIL RHODES: Empire Builder 293 




IX. BASIL ZAHAROFF: The Warmaker 337 

INTERLOGUE THREE: 1. hugo stinnes 373 


X. MARK HANNA: The Politico 383 

XI. JOHN D. ROCKEFELLER: The Builder 422 

XII. J. PIERPONT MORGAN: The Promoter 452 

INDEX 515 

F oreword 

What follows in this volume is obviously a series of biographi- 
cal essays. They present the outlines of the lives of eleven men 
and one woman. They are offered as twelve significant fortunes 
since the Renaissance. 

It would have been a simple matter to have made a somewhat 
different selection. I might have chosen one of the Medici or Sir 
Thomas Gresham or Jacques Coeur instead of Jacob Fugger in 
the dawn of the capitalist system. At a later period I might have 
written of the Brothers Paris or Samuel Bernard rather than John 
Law. I might have chosen Ouvrard, the financier of the French 
Revolution and Napoleon, as well as the Rothschilds. What excuse, 
someone will ask, can there be for including Cornelius Vanderbilt 
and not John Jacob Astor, Mark Hanna and not Carnegie, Hetty 
Green but not Jay Cooke or Jay Gould? And what reason can 
there be for leaving out Henry Ford and Andrew Mellon and the 
du Ponts? 

In the course of the book I hope to make plain to the reader 
my reason for these choices. After all, the cast of characters of 
this or any other work having the same end must be determined 
upon some central principle of selection. I might have selected 
merely the dozen largest fortunes, in which event I would have 
left out not only Mark Hanna and Robert Owen, but J. Pier- 
pont Morgan and, indeed, almost all of the others save perhaps 
Rockefeller, Vanderbilt, and Hetty Green. In fact, upon this 
standard of choice, it may be that Rockefeller alone could have 
been included. 

Generally, what I have had in mind was to write of those figures 




in the history of wealth whose fortunes were, upon the whole, 
fairly representative of the economic scenes in which they flour- 
ished and whose methods of accumulating wealth offered the 
fairest opportunities to describe those methods. I have also tried 
to place these money-makers in certain important eras, putting 
more emphasis upon the latest. Having chosen Mr. Rockefeller 
as obviously the most important from any point of view in the 
period between 1870 and 19x1, it was not possible to include 
Andrew Carnegie or Philip Armour or any of the oil barons in 
this country or Europe, however great the temptation. Having 
decided upon Vanderbilt I could not, without duplication, have 
added Gould or Huntington or Hopkins or Harriman or a score 
of other railroad kings. 

Having chosen my subject my aim has been to make, as clearly 
and vividly as possible within the limits of a single essay, a picture 
of the economic system of the time; the means by which wealth 
was produced and the devices by which large amounts of it were 
siphoned off into the strongbox of the man of wealth. I have made, 
in part at least, one or two departures from this standard of 
choice. Hetty Green was selected because I wished to include at 
least one miser’s fortune and one woman’s fortune and happily 
she combined both. As for the omissions, I have left out several 
men whose lives I was sorely tempted to examine. Among them 
there was at least one Oriental fortune. There were one or two 
immense land fortunes. I omitted them because, after all, I felt 
they belonged not so much to the times in which they appeared as 
to a departed or at least a vanishing system of economic life. In 
the case of Mr. Ford — and this will hold for several others — I 
did not include him in obedience to a rule I made before I began 
my studies: that I would deal with the fortune of no living person. 

I have been guided not merely in my selections but in the 
method of treatment by my conceptions of the means by which 
wealth is created and the mechanisms by which it is drawn off into 
the hands of rich men. 

Wealth is created by labor — but by directed labor. It is created 



by labor working with tools and reinforced and multiplied by 
many skills — skills of hand and mind. It is created by this labor 
working upon materials. Putting it all together, we may say that 
wealth is created by labor working with various skills, with tools, 
upon raw materials, and under direction. The completed product 
is the composite of the materials, the common labor, the skills, 
the tools, including the whole technological endowment of the 
race and the direction of organizers. 

No man working with his own hands, upon materials of his 
own possession and creation, with tools of his own fabrication, 
can produce enough to make himself enormously wealthy. The 
problem of becoming rich consists in getting a fraction — large or 
small — of the produce created by the collaboration of many men 
using all these energies. 

The whole history of wealth accumulation consists in tracing 
the devices by which one man or a small group of men can get 
possession of this fraction of the produce of many men. In the 
beginning, when there were no machines, no money, no intricate 
inventions of credit, no man could establish a right to a share of 
the products of other men save through a simple and bald asser- 
tion of ownership over the materials and the men. Landownership 
and human slavery were the first instruments of the acquisitive. 
And as no man could acquire dominion over enough land and 
enough men to become rich save by an assertion of divine political 
power, we find the first rich men were kings. 

As society grew and developed, men became individually more 
productive, on the one hand, and, on the other, the invention of 
money and credit enabled private individuals to establish claims 
upon the labor of ever-larger groups of men. We may say that the 
whole history of the art of accumulating wealth is the story of the 
invention of machines and the invention of the instruments of 
credit. Indeed, the two forces that distinguish the older world and 
its appalling scarcities from the newer world and its growing 
abundance are technology and credit. 

Scientists and scholars slowly added one scrap of knowledge 



to another, one mechanical device to another, gradually wresting 
from the earth its undreamed-of resources and multiplying the 
productivity of men. At the same time businessmen were slowly 
discovering and perfecting the devices of credit. They began with 
the simple transaction of lending a quantity of grain out of one 
crop to be repaid out of the next. They invented money as a meas- 
ure of value. They got around to making loans of money. Then 
they reduced the money-loan transaction to a written record and 
then to a written record that could be negotiated. The layman 
who takes modern business methods for granted scarcely dreams 
of the immense advances made with this dynamic energy of credit. 
At first, when one man loaned a hundred drachmas to another, 
the drachmas had to be in existence before they could be loaned. 
We have proceeded so far that now we have the modern miracle 
of the bank loan in which money is actually created by the very 
act of lending it, so that we have the phenomenon of a nation using 
for its money the debts of its people. 

In the chapters that follow I have kept these facts in mind. And 
as these historic Moneybags move across our stage I hope we 
may be able to see men fingering these inventions of credit and 
exchange, then strengthening and refining them — money, credit, 
notes, interest, bills of exchange, discounts, banks of deposit, 
then banks of discount, property titles, mortgages, clearances, 
stocks and bonds, and finally all the innumerable gadgets of the 
modern corporate world. 

My aim has been to present the histories of these men and their 
times as nearly as possible in terms of our own day. We are apt 
to think of the problems of our time, with its depressions, its armies 
of unemployed, its farmers crying for higher prices, its burden- 
some debts, its social devices for dealing with poverty, its programs 
and plans, as unique in history. We may suppose that the strata- 
gems by which our bewildered leaders have sought to elude fate 
and social disaster are quite new and untried. But it is not possible 
to wander through the market places and bourses and forums and 
slums of old cities and, indeed, ancient ones, without being struck 



by the parallels between their crises and our own. We shall see 
depressions in Florence, and France struggling against debt in 
the days of Louis XV, poverty tormenting farmers and workers in 
the Middle Ages and their sovereigns and premiers conferring 
and programming vainly against forces they did not understand 
which were changing their societies. We shall see businessmen 
and public officials quarreling about monopoly and government 
control and taxes and public debt and workers’ claims and gov- 
ernment spending. We shall behold economic messiahs with their 
gospels of peace and plenty all through the eras of Fugger and 
Law and Rothschild down to our own day. Men have been mut- 
tering about the same social ailments, the same disturbances, the 
same indignities and irritations for untold centuries. 

These parallels, of course, can be pushed too far. The tempta- 
tion is great. And because this will be evident I am eager at the 
outset to make it clear that I have faithfully sought to use no 
material that I have not laboriously examined and for which there 
is not ample support in history. 

One further point. In the course of these several histories of 
rich men, questions have arisen and points have come to my mind 
which, it seemed to me, ought to be noticed. And yet I could not 
quite see how this could be done without interrupting the narra- 
tives with discussion that would serve only to distract the reader. 
I have attempted to solve this problem by including between some 
of the chapters certain interchapters in which I have offered brief 
observations on such of these questions and points as have in- 
terested me. The reader will find them in the interlogues so 
arranged that if he is sufficiently interested he may peruse them, 
and if he is not he may skip them without losing any of the essen- 
tial parts of the twelve histories that follow. 

John T. Flynn 

February , 1941 
Bay side, L. I. 




facing page 3 













Historical Pictvrrs 

Jacob Fugger 


Fugger the Rich 



Jacob Fugger, surnamed the Rich, was the most important and 
imposing figure in the dawn of the capitalist era. Starting out to be 
a priest, he ended by becoming the greatest millionaire of the six- 
teenth century — greatest of merchant adventurers, first important 
industrialist-promoter of the modern world, banker to emperors 
and popes, whose countinghouses, warehouses, and factories 
spread to every city and port along all the trade routes of Europe. 

Born three decades before Columbus discovered America, 
Fugger came into the world at a moment when men everywhere 
saw with dismay that their world was mortally sick. A monstrous 
internal growth was splitting the womb of feudalism. A new set of 
bones and muscles and nerves was drawing life from the disin- 
tegrating tissues of the old social system. Life and vigor were 
already in the blood of the infant ism that would take over the 
world for the next five centuries and that now, in its turn, seems 
gray and feeble and finds within its own womb struggling for 
birth a whole litter of new systems. Men were groping for new 
forms and patterns under which to live, and new instruments of 
organization suited to ordering these new ways. Profit, the modern 
merchant, and the middle class had come upon the scene to chal- 
lenge the scholastic ethics and economics of Aquinas, the political 
theories of Albertus Magnus, the acquisitive techniques of the 
brigand nobles. And in the organization of the commercial instru- 
ments of this new era Fugger played a role not unlike that of 
Rockefeller and Morgan in giving direction and form to the new 




corporate civilization which got under way in America in the 
early ’seventies. 

Perhaps European society could have done nothing better for 
itself than feudalism in all the circumstances of the time. But 
essentially feudalism did not represent an effort at growth. It 
might be described as a vast shelter, a refugee haven into which 
the harried and starving and disordered masses of the first cen- 
turies following the destruction of the Roman Empire fled for 
safety. It was an escape from violence and want. 

The terror of Europe in those early years was famine. Hallam 
records that in the seventy-three years in the reign of Hugh Capet 
and his two successors, forty-eight were years of famine and that 
from 1015 to 1020 the whole western world was almost destitute 
of bread — a frightful interregnum of barbarism when, as Hallam 
records, mothers ate their children and children their parents and 
human flesh was sold “with some pretense of concealment” in the 
market place. People sold themselves into slavery to escape hunger. 
In the presence of persistent hunger the outer crust of civilized 
morals crumbles and falls away, leaving only the unclothed savage 
man, pining for food. To him a precarious liberty seems a small 
price to pay for safety and meat. 

Meantime, many of the stronger chieftains took to brigandage. 
Not yet emancipated from the ethical concepts of their northern 
paganism and the worship of gods who were little more than divine 
gangsters and celestial thugs, they broke upon the weak with that 
strange outpouring of cruelty that has marked man’s journey from 
the beginning. The only refuge for the weaker peasant was to sell 
himself into the servitude of a stronger feudal baron. 

In time, of course, this system became organized, strengthened, 
crystallized. And it was this system which was now dying. A new 
system that would symbolize not escape and flight but growth and 
development was to take its place. 

The world of the Middle Ages was a rural world in which men 
lived in little clusters of 50 to 500 souls. The unit was the manor. 
It was a communal microcosm made up of a small number of 



families clustered around the castle of the lord. The castle, the 
cottage, the orchard, the fields, the pasture, the wood; these were 
the physical constituents of this tiny society. It was isolated from 
other societies. There might be a village but it was just a part of 
the estate. In a few places there might be a town. 

The society within that little cosmos was, as to its domestic 
affairs, totalitarian. It was a collectivist society. It was a society 
in which the lord was the master and the state. 

The manor produced the wealth that was created in the Middle 
Ages. It was a community organized for subsistence. And that is 
all it got — little more for a family than one gets on relief in de- 
pression-ridden America. The fields yielded grain, a few vegetables 
(carrots, cabbage, turnips, and, perhaps, some peas, beans, onions, 
celery, garlic, parsley). There was probably an apple and pear 
orchard and a vineyard. The flour was ground in the small estate- 
owned mill, the wine pressed in the estate-owned press. There were 
craftsmen who might be farmers also, and who exchanged their 
services for other services or for the products of others. Furniture 
was made, wool raised, carded, and woven, hides cured and formed 
into shoes and jerkins and belts upon the estate. But the produce 
of the estate was limited by the ability of the handicraftsmen to 
make things with very crude tools and out of limited raw materials. 
There are more kinds of things upon the shelves of a modern 
grocery than was to be found in the whole of Germany. All that 
vast multitude of commodities and merchandise which forms the 
necessities of the twentieth century was unknown. There were 
more different kinds of monkey wrenches made in predepression 
America than there were articles of merchandise in the feudal Holy 
Roman Empire. As someone has observed, more freight sweeps 
over a single railroad in a single night in one direction than poured 
through the Tirol passes in a year in the age of Frederick III. 
When the season’s produce was available and all accounted for, 
the dwellers of the feudal commune had a modest subsistence while, 
by a variety of proscriptions and ordinances and dues and taxes, 



a certain amount of all that had been produced trickled into the 
bins and barns and cellars of the lord. 

But since the lord commanded a fraction of the produce of only 
a small population of tenants, his whole share was not sufficient 
to make him rich. Only those lords who owned immense manors, 
comprising a town or two, or who owned a dozen or a score or a 
hundred manors, as some did, extracted enough from their tenants 
to amount to riches. The richest, of course, were those princes who 
possessed extensive domains and drew tribute from the tenants 
of hundreds of manors. 

On the manor there was and could be nothing of this thing called 
abundance which the modern politician juggles before the hunger- 
ing eyes of his constituents. Barring the visitation of famine or 
disease there was enough to eat, but little more. Life was inexpres- 
sibly dull. To the manor courtyard came at intervals the wander- 
ing acrobat and juggler and magician with their tricks; the pilgrim 
with his tales; the minstrel with his songs and sagas, and the ped- 
dler with his few exotic wares and spices and his gossip. But these 
were infrequent interludes in a world of dullness. 

It was this world that was cracking up. And the force which was 
doing it was money, the merchant, and the town. 

Imagine a little town — part of the estate of some flourishing lord. 
Within its walls is a jumble of rude dwellings, the homes and shops 
of craftsmen — weavers, glovers, armorers, smiths, perhaps glass- 
makers, or, mayhap, woodcarvers and other workers; the castle 
of the lord, with its retinue of workers, villeins, men at arms, and 
knights. Outside these walls, in some sheltered spot, is a cluster of 
merchants, with their carts and benches in the open air. As time 
wears on, these servile and declassed bargainers set up their dwell- 
ings, fix their headquarters there, and, after a while, form a small 
commercial community. Within are other thrifty craftsmen who as- 
sume the functions of merchants, handling their own and their 
neighbors 7 products with these outlanders and at the market places 
and fairs. In time these merchants, within and without the walls, 
find they have common interests, common wrongs to resist, com- 



mon rights to support against the exactions of the lord. They or- 
ganize. And thus the bourgeoisie is born — the bourgeoisie and the 
Chamber of Commerce which is to inherit the earth. This bour- 
geoisie clamors for a voice in affairs. It spreads and grows until it 
swallows the town. It organizes guilds. It sets up demands. It takes 
over from the lord the function of governing the towns either by 
free charter or by violent assumption of power. It regulates trade, 
prices, production, competition. Imposing guild houses rise in these 
new towns all over Europe. These merchants grow moderately 
wealthy. They build stouter houses behind more impregnable walls. 
By the middle of the fourteenth century they were already chal- 
lenging the power of the feudal lords. Thus they not only laid the 
foundations of the modern city, set in motion the money economy, 
and launched the capitalist system, but they brought into being 
the first rudimentary techniques of representative government, 
though it was a long time before the constituency represented 
would be a popular one. Thus the modern town was born, and out 
of it came that ogre which ate up the philosophy, the ethics, the 
slavishness, the ways of life of the almost frozen medieval system. 

And thus a new kind of rich man came into the world. The rich 
man of the feudal system was the hereditary lord who in an out- 
law world swapped with the peasant and burgher protection and 
order for a share of their product. He took part of their product 
and part of their labor directly, in places taking as much as three 
days out of six. He demanded fines and dues and tribute, making 
almost every event in his own life and his vassals’ births, marriages, 
and deaths the excuse for some new kind of levy. 

But little by little gold and silver was flowing into this world of 
barter. By small degrees Europe found herself shifting to the money 
economy with consequences that her untutored social philosophers 
could not fathom or foresee. And as the towns spread out, the mer- 
chants began to accumulate money in exchange for a wholly dif- 
ferent service from that performed by the feudal lord. After a few 
centuries they would take over the earth and set it spinning “down 
the ringing grooves of change” until one day a new force would 



arise to threaten the entrepreneur as he in his time challenged the 


It was about this time, in 1380, that a simple Swabian weaver 
named Hans Fugger left his small village of Graben to try his for- 
tune in one of these growing towns — the free city of Augsburg. At 
the end of his life he was still a weaver, but he was more merchant 
than weaver, buying raw cotton for himself and his neighbors from 
Venice and selling his fustian and theirs to other cities. 

When he died, he was succeeded by his two sons, Andreas and 
Jacob. They in time split off into separate enterprises and, indeed, 
separate dynasties. They became respectively the heads of the two 
Fugger houses — the Roe Fuggers and the Lily Fuggers. The Roe 
Fuggers, headed by Andreas, became prosperous first and disap- 
peared quickly from the chronicles of the times. Jacob’s de- 
scendants became the Lily Fuggers (so named because of their 
arms). He built a flourishing business, married the daughter of a 
Franz Basinger, a prosperous merchant and Master of the Mint, 
and set up in a handsome house in the chief street of Augsburg 
opposite the guild house of the weavers. When he died in 1469 he 
was ranked seventh among the wealthy men of the city. 

Jacob Fugger II, his youngest son, was born March 6, 1459, in 
this imposing home. He had two older brothers, Ulrich and George, 
who were already employed in their father’s counting room when 
he died. Ulrich at this time was 28, George 16. Jacob was but 10. 
But they were fortunate in the presence of an intelligent mother 
who was also a good businesswoman and who was able to direct 
her young sons wisely until they were able to take hold with a sure 
grasp. Jacob, however, was marked for holy orders. He proceeded 
as far as his first vows and was prebendary in Herrieden when 
his strong-minded mother decided he should forsake the sanctuary 
for the countinghouse. He left the cathedral in Franconia and went 



to serve his apprenticeship at Venice. In 1478, aged nineteen, he 
returned to Augsburg and took his place as a partner in the busi- 
ness which was then known as Ulrich Fugger and Brothers. 

Thus Jacob did not start from scratch. It was into a very flour- 
ishing enterprise he stepped as a partner when he began his busi- 
ness career. His brother Ulrich, an able business administrator, had 
greatly enlarged the business and had actually made that connec- 
tion with the House of Hapsburg which was later to prove of so 
much importance in the career of Jacob. He had already spread 
the firm’s branches to a dozen European trading cities and had 
established it as a collector of papal revenues in Scandinavia. How- 
ever, while Ulrich and George were businessmen of marked abil- 
ity, Jacob’s powers were of the highest order. And, despite his 
youth, he was not long in the firm before his influence began to 
assert itself. Before the fifteenth century had ended he had be- 
come the leader in the rapidly growing enterprise. 

He was one of those men who not only possess great talents but 
exhibit them in their bearing and countenance. He had that kind 
of imperious manner and Jovian visage that marked the elder Mor- 
gan and made lesser money grabbers tremble in his presence. He 
possessed that inexhaustible vitality, that tranquil and unruffled 
temper, that immense talent for organization that characterize 
the greater industrial barons of our own day. In his lifetime he 
was assailed with varying degrees of fury as a monopolist, an enemy 
of German interests, a selfish and greedy hunter after profits, a foe 
to the established morals of the church and the state. Luther de- 
nounced him upon numerous occasions. And it was, indeed, Fug- 
ger’s fate to find himself mixed up in that fatal adventure in papal 
finances that precipitated Luther’s revolt. But through all this he 
preserved the perfect composure of the man who believes himself 
to be the special child and instrument of the deity. Just as a later- 
day industrial saint, John D. Rockefeller, said, “God gave me my 
money,” the pious and acquisitive Fugger said: “Many in the world 



are hostile to me. They say I am rich. I am rich by God’s grace 
without injury to any man.” 

Beginning as a theologian and then as a merchant, he became in 
turn a banker, a promoter, an industrialist, a commercial states- 
man. He was a dynast. But he had no ambition to found a family 
of noble and unproductive rentiers. He looked with unmixed satis- 
faction upon the function of the entrepreneur and the profit by 
which he lives. He put aside the suggestion of retirement into tran- 
quillity and ease with the observation that he “wished to make a 
profit as long as he could.” His ambition was to create a rich and 
powerful dynasty of bankers and industrialists. He consorted with 
princes, emperors, and popes, but he never fawned upon them. He 
could write to an emperor who owed him money — the most power- 
ful potentate in Europe — to remind him that he owed his crown 
to Fugger’s financial backing, that his majesty owed him money, 
and he begged that he would “order that the money which I have 
paid out, together with the interest upon it, shall be reckoned up 
and paid, without further delay.” He lived amid magnificence, sur- 
rounded by priceless objects of art and the greatest library in 
Europe and with a collection of estates which he deemed becom- 
ing to a great prince of trade. 

After his death the capital of the Fugger company, according 
to an inventory made in 1527, was 2,021,202 golden gulden. And 
twenty years later (1547) the firm, under the leadership of his 
nephew Anton, a man of ordinary abilities, had a capital of five 
million gulden. 


The foundation of the Fugger fortune, of course, was merchan- 
dising. For a long time big merchants had been shouldering in 
among the swarms of peddlers who roved over Europe. The ped- 
dler’s cart had left its wheel ruts along new roads, and these, with 
the remnants of the old Roman roads, became the nerve system 
of the Renaissance. Along these trade routes new cities rose and 



old ones took on new life. Transport companies were formed and 
navigation canals were opened. These peddlers were changing the 
face and stirring the heart and lungs of Europe. They made it pos- 
sible for the beekeeper in some remote Thuringian manor to ex- 
change his honey for a few ounces of pepper or cinnamon from 
the spice islands of Asia. Through their profit and coin-hunting 
expeditions it became possible for the fustian weaver of Augsburg 
to buy the product of the silversmith of Florence, the silks of 
Venice, the brocades of Lahore, and the perfumes of Alexandria. 
Two great streams began to flow around Europe: one a stream of 
goods made up of every sort of product of every clime; the other 
a stream of money coined in the little mints of hundreds of petty 
princes. These fustian makers and wool weavers and tool mongers 
began to have a wider market for their wares and they began 
to produce more. Men flocked to the towns. The capitalist system, 
with its money and its freedoms, was becoming the reigning ism, 
even though that word was unknown and the only isms men 
heard of were those which described the bloody and warring 
armies of religion. 

Men like Fugger were coming to be a need. The smaller mer- 
chants, moving in an incessant stream over the growing network 
of European trade routes, had depended upon the customers they 
found at the manor gates, at the market places and the fairs. 
They were bringing to merchandising the utility of place. But a 
different sort of merchant was needed to confer upon it the utility 
of time and who would add the function of the wholesaler or 

This called for a special kind of talent, the sort that in later 
years accounted for the huge fortunes of the early Astors, the 
English merchant adventurers, the Stewarts, the Wanamakers, 
the Selfridges and Strauses in this country and England. They 
had to have something more than mere instinct for bargaining. 
They had to have not only a capacity for organization and for 
accounting, but the spirit of adventure — unlike the modern mer- 
chant who reduces all to formulas called the science of merchan- 



dising and who thrusts the element of risk upon other shoulders. 
These large-scale entrepreneurs were putting on respectability. 
Already some English merchants like Sir William de la Pole and 
Sir Richard Whittington had attained to knighthood, and in 
Florence the Medici had achieved nobility and become the rulers 
of the city. The merchant, who had been hardly distinguished 
from the pirate and whose morality, says Nietzsche, was merely the 
refinement of piratical morality, now emerged like the traders of 
Tyre, “the crowning city, whose merchants are princes, whose 
traffickers are the honorable of the earth.” 

The Fugger firm handled a large number of commodities and 
products. Fustian, a sort of rugged cotton textile of which cordu- 
roy is one type, was in wide demand, and Augsburg was a great 
center of fustian manufacture. Fugger supplied the weavers with 
raw cotton that was picked up at Mediterranean ports, chiefly 
Venice, and brought by sumpter mule through the Tirol. In turn 
he bought their product and supplied it all over Europe. He was 
something more than merchant; he was also a manufacturer, of 
the contractor type, operating on the putting-out system, furnish- 
ing the wool and taking the cloth from some numerous hand 
looms — 3500, some historians say. 

He was a large importer of metals, spices, silks, brocades and 
damasks, velvets, herbs, medicines, works of art, rare and costly 
viands, fruits, and jewels. He purchased large diamonds, some 
costing as much as 10,000 to 20,000 golden gulden. 

First among this merchandise was luxury goods. The princes, 
nobles, gentlemen, and the richer merchants were his customers. 
The lords and gentry and well-to-do townspeople were collecting 
their dues and fines and taxes in money, and there was a growing 
volume of silver and gold to spend. The lords had a constant 
flow of moneys which were for the most part dissipated. The 
income of Europe was beginning to pile up in the hands of the 
large merchants. 

Inevitably these men were bankers — bankers to other mer- 
chants, to farmers, to weavers, and to governments large and 



small. When any government wanted money it customarily went 
to its rich merchants. 


In the infant capitalist world of the fourteenth century the 
closest approach to big-business technique was the spice trade. 
Spice played the role that copper was to play in the fifteenth cen- 
tury and oil in the twentieth. There was not much variety in the 
foods of the time and the means of preserving them were even 
less developed. The palate took refuge from the monotony of a 
limited diet in a jolt of pepper or some other spice. Spices came 
into widespread demand and merchant captains roved the seas 
looking for spice supplies with something of the adventurousness 
of the modern wildcatter hunting for petroleum. 

For many years Venice was the center of the European spice 
trade. But Portugal, following her conquests in India, got con- 
trol of a supply that transferred the world’s spice capital from 
Venice to Lisbon and later to Antwerp. Here is the way this 
business operated. First of all, it was a royal monopoly. The 
Portuguese king, like most monarchs of the time — and since — 
continually needed funds. He would make a contract with a 
merchant to outfit a vessel at the merchant’s own expense for an 
expedition to the spice regions of the East dominated by Portugal. 
The merchant loaned the king a sum of money proportioned to 
the amount of spice or pepper he hoped to bring back. When he 
returned with his hold loaded with pepper, cinnamon, and other 
spices the king paid off the loan with the cargo. These were called 
pepper contracts or spice treaties. Obviously they were highly 
speculative, since it was a long voyage, in primitive vessels, across 
seas menaced by storms and pirates. The empty-handed skipper, 
of course, lost his loan. 

Fugger dealt in spices, but for most of his life he looked upon 
these spice adventures and their treaties a good deal as John D. 
Rockefeller looked upon the oil producers. Rockefeller preferred 



to buy their oil after they had fetched it out of the ground, and 
Fugger preferred to buy spices from the successful shippers 
after they had brought it safely back. A man had to buy pepper 
at a distant point, pay for it in advance in the form of a loan to 
the king, haul it at his own expense and risk, and take the chance 
in a fluctuating market that it would be worth what he paid for it. 

This was not the sort of business Fugger relished. But the 
other merchants of Augsburg, chiefly the great Welser firm, were 
active in this. When the Portuguese conquered India, a consor- 
tium of Augsburg merchants led by the Welsers made a pepper 
treaty with the king to equip a fleet and made an immense profit. 
Fugger took only a small piece of this. 

But in the end he succumbed, as the refiners succumbed to 
wildcatting for oil. Magellan, after a three-year trip around the 
world, returned, having made various conquests. He took pos- 
session of the Moluccas, the fabulous Spice Islands, for the crown 
of Spain. Jacob Fugger sought a spice contract with the Spanish 
king. With his fellow South German merchants, he equipped two 
voyages, one led by Sebastian Cabot and one by Garcia de Loaisa, 
to bring back pepper from the Moluccas. Both voyages were 
complete failures. But Fugger died before they got well under 
way and never lived to see the wisdom of his earlier restraint 
vindicated. He lost 4600 Spanish ducats on this venture. 


These rising magnates were not without dishonor in their own 
times. They were economic revolutionists. They were as obviously 
at war with the established order as the inventors of the power 
loom at a later day or the makers of modern corporate finance 
capitalism in the last century or the protagonists of the planned 
capitalist society in our own day. An old dogma of economic 
ethics, hoary with age and heavy with the benediction of the 
church — the principle of the “just price” — was being hustled out 
of civilization. 



Europe had been operating on the economic and social ethics 
of Saint John Chrysostom, remodeled and adapted to the times 
by Saint Thomas Aquinas, for centuries. There was a ban upon 
the unrestrained pursuit of wealth as something inherently evil. 
Profit and interest were the twin devils of the scholastics as they 
were of the atheist Marxians four centuries later. Chrysostom 
had said: “Whoever buys a thing in order to make a profit selling 
it, whole and unchanged, is the trader who is cast out of God’s 
temple.” “What else is trading,” said Cassiodorus, a monkish 
jurisconsult and sort of ghost writer to Theodoric, “but buying 
cheap and wishing to sell dear at retail? . . . Such traders the 
Lord cast out of the Temple.” This was fourth- and sixth-century 
Christianity. The great Angelic Doctor amended this to permit 
a profit — but at a “just price.” “Trading in itself,” he said, “is 
regarded as somewhat dishonorable, since it does not involve a 
logical or necessary end.” “Gain,” he argued in his Summa The- 
ologica, “which is the end of trading though it does not logically 
involve anything honorable or necessary, does not involve any- 
thing sinful or contrary to virtue; hence there is no reason why 
gain may not be directed to some necessary or honorable end; and 
so trading will be rendered lawful; as when a man uses moderate 
gains acquired in trade for the support of his household or even 
to help the needy.” (Question LXXVII, Article IV.) 

Out of this grew the doctrine of the just price which was sup- 
posed to inspire the trade of Europe until the eighteenth century. 
But as Saint Thomas himself had said, the “just price is not 
absolutely definite but depends rather upon a sort of estimate.” 
Society therefore contrived a legal agency for ascertaining and 
proclaiming the just price. The merchant’s guild became the 
arbiter. The trader and craftsman were supposed to be content 
with an income fitting their station in life. And in fixing the just 
price the guild was supposed to be guided by the interest of 
society and not the interest of the entrepreneur, which is one 
point of difference between the ancient guild and its modern edi- 
tions — the twentieth-century trade association. Under the influ- 



ence of this philosophy the guilds set up as code authorities in a 
medieval NRA and proceeded to subject medieval trade to the 
most extensive and exacting regulations. Everything was for- 
malized. Trade itself was caught in hard and fast jurisdictional 
ruts. In Frankfort there were 191 crafts — eighteen in the iron 
industry alone. And as regulation begets regulation, the feudal 
town became enmeshed in a tangle of rules and formulas and ordi- 
nances and red tape that utterly constricted the economic system. 

Everything had tended to become frozen. The merchants sought 
to hold the workmen to long hours, low wages, and protracted 
apprenticeships. There was a resistance to new men coming into 
the merchant’s and master craftsman’s ranks. High fees were 
imposed to keep the newcomers out. A tinker in Brussels was 
charged 300 florins for the privilege of starting up his own shop. 
The apprenticeship and journeyman stage was lengthened some- 
times to twelve years. 

Every form of progress had to fight against the established 
rulers of manor and town. Poverty was appalling. Workers lived 
in hovels. Abortive proletarian uprisings appeared all over Europe. 
Peasants rose without success in Saxony, Silesia, Brandenburg, 
Illyria, Transylvania. English laborers demanded to be paid in 
money. Journeymen guilds arose under cover of religious and 
technical-instruction associations — bootleg unions, like American 
speakeasies during the prohibition era disguised as dramatic and 
literary clubs. 

For a century a quiet, unostentatious, cautious, and inarticulate 
resistance to these multiplying fetters was under way. New ways 
of life, new demands of trade, the changes made by the expand- 
ing money economy were forcing growing alterations in the gen- 
eral acceptance of these theological concepts of trade. 

For one thing, in a growing money economy credit was neces- 
sary, even to the pope and the abbot who thundered against in- 
terest. Pope John XXIII died with his miter in hock to Giovanni 
de’ Medici for 38,500 florins. When John died his successor 
demanded the miter back under pain of excommunication. In- 



deed, one monarch who possessed what was believed to be the 
crown of thorns that had pierced the brow of the crucified Christ 
pledged it to a Venetian banking house for a loan. 

This need for credit expressed itself at first in a toleration of 
the Jews. The new monarchs assumed new powers without the 
financial means of supporting those powers. The religious orders, 
embarked upon grandiose programs of cathedral and monastery 
building, had to have money. Christians could not lend since the 
church forbade it. This offered an opening for the Jew, who was 
not bound by Christian ethics. And so, being excluded from 
other forms of trade, he became the moneylender of Europe. It is 
of more than passing interest that Aaron of Lincoln, one of the 
earliest known English Jewish moneylenders, had advanced funds 
to the St. Albans minister at Lincoln and at least nine other 
Cistercian abbeys. When he died the monasteries owed him 
$24,000, which the good King Henry II piously declared forfeited, 
at the same time confiscating Aaron’s property and cash, which 
he used to wage war against Philip Augustus of France. Many 
such instances are recorded. 

For this pretty situation Saint Thomas had provided a con- 
venient ethical shelter. The great theologian held lending at in- 
terest to be a sin and an injustice to the borrower who was the 
victim of usury. “The usurer sins in doing an injustice to the 
one who borrows from him upon usury. But the borrower upon 
usury does not sin, since it is not a sin to be a victim.” But, asked 
the theologian, does not the borrower induce the lender to commit 
a sin by offering him the occasion? “It is lawful,” expounded the 
Angelic Doctor, “to use sin for a good end.” He adds, with what 
might be called a naive, almost holy sophistication, that “He who 
borrows money upon usury does not consent to the sin of the 
usurer, but uses it; nor does the taking of usury please him, but 
the loan, which is good.” 

And what end could be better than the building of a monastery 
or a cathedral or the support of a Christian monarch? As to the 
confiscation of the property of the usurer, is not the sinful man 



subject to punishment? It is not possible to excommunicate a 
Jew. But it is possible to deprive him of the means whereby he 
or his tribe commits a sin. To take his funds is like disarming a 

As the new methods spread under the influence of the ex- 
panding money economy, the need for credit by businessmen and 
sovereigns grew to the point where funds more formidable than 
the Jew could supply were needed. Moreover the merchant class 
was accumulating money savings which they were eager to put 
out at interest, and so the Christian banker appeared upon the 
scene and the Christian ethic lost some of its plausibility. Society 
divided into two schools, those who stood by the old scholastics 
and those who took the fork in the road behind the leadership of 
the humanists. The old-timers roundly denounced Jacob Fugger 
and his colleagues in trade. They carried the war into the Diet 
and into politics. There were great cities whose security depended 
upon the power of the guilds, like Constance and Basle and 
Liibeck and all the Hanseatic towns. There were some others, 
like Augsburg, and the Flemish towns, and many in France, 
which were building their prosperity upon the independent 

The Hanseatic League, which comprised 150 cities at its height, 
forbade any man to buy grain before it was grown, cloth before 
it was woven, herring before it was caught. It regulated prices, 
submitted its members to the most minute regulations, arranged 
all to perpetuate the place and power of the “Little Man,” backed 
its policies and rules with assemblies, tribunals, police, fleets of 
ships protected by a navy, flew its own flag, and maintained 
foreign branches where its branch managers and clerks lived in 
barracks under an iron discipline. Despite its power, such mer- 
chants were cruelly handicapped against the free, unfettered 
devices of the independent merchant. Hence they denounced the 
rising Fugger. At Constance the Ravensburg Company, until then 
the greatest trading corporation in Germany, demanded that no 
one should be permitted to have a capital exceeding 100,00c 



gulden, though its own was not less than 140,000. The Council 
of Nuremberg would restrict it to 25,000 gulden. In the German 
Diet it was said that the wealthy were reproached with “destroy- 
ing all chances for work of the small trader on a moderate scale.” 
In France a similar movement was afoot. Jacques Coeur, the 
erratic but powerful French millionaire, was indicted as one 
“who had impoverished a thousand worthy merchants to enrich 
one man.” This sentence, in endless variations, was destined to 
go echoing through the succeeding centuries. In the American 
Congress, about the time John D. Rockefeller was born, a Missis- 
sippi representative would bewail “the death of so many small 
establishments which might separately and silently work their 
way into honorable existences” and “one great establishment 
rises on the ruins of all the surrounding ones.” 

Fugger soon concluded, as John D. Archbold and John D. 
Rockefeller did, that his philosophy needed an apologist. And 
he found the ideal one in Dr. Konrad Peutinger, the humanist, 
whose home was in Augsburg. Peutinger was a more formidable 
champion than Chancellor Day of Syracuse University or the 
flock of prosperous preachers who took Rockefeller’s gold and 
used scripture to defend him. He was a sort of combination of 
Samuel C. T. Dodd, Rockefeller’s verse-making and philoso- 
phising counsel and Elihu Root, who spread his own respectability 
thinly over the hated monopolists of his time. 

He was a lawyer and, like most lawyers of that era, a theo- 
logian who had taken his place with that school which believed 
that the philosophy suited to a human society must seek its cri- 
teria and data in the affairs of men rather than in the abstract 
contemplation of the spirit. He was Fugger’s chief adviser. He 
wrote: “Every merchant is free to sell as dear as he can and 
chooses. In so doing he does not sin against canonical law; neither 
is he guilty of antisocial conduct. For it happens often enough that 
merchants to their injury are forced to sell their wares cheaper 
than they bought them.” He defended cartels and monopolies, 
profit and interest. He was indeed the first great philosophical 



evangelist of the profit system. He drafted laws for the Emperor 
Maximilian I in conformity with his beliefs and the interests of 
his powerful client. 

Thus always the reigning acquisitive group must have its phi- 
losopher. Rameses found his in the temple. Nicias had his Hiero. 
The corporations of Rome had their Cicero. Saint Thomas turns 
up providentially to build a fortress of philosophy around the 
feudal lord whose regime depends upon the suppression of the 
merchant. And Dr. Peutinger appears upon the scene to refute the 
Angelic apologist when his ethics no longer fit the prevailing process 
of wealth getting. 

As a matter of fact, even the great Angelic Doctor himself had 
left a large loophole for the collectors of interest. He held that 
while a man could not receive interest, yet if he received a gift 
“not asking it and not according to any tacit or explicit obligation, 
but as a free gift, he does not sin; because even before he lends 
the money he might lawfully receive a free gift, and he is not put 
at a disadvantage by the act of lending.” ( Summa Theologica, 
Lesson LXXVIII, Article II.) 

Here is pretty thin skating upon the theological ice, and in- 
evitably the ice cracked first by the use of the “gift,” then by an 
understanding, by means of the bonus, much as interest-rate laws 
have been evaded in our own time, and finally by frankly throwing 
overboard the whole Aquinian luggage. For when Fugger writes 
to Charles V for payment of his loan he asks plainly that “the 
money which I have paid out, together with the interest upon it, 
shall be reckoned up and paid, without further delay.” (Author’s 

Certain it is that Fugger, the pious Christian merchant, stood 
in need of an ethical basis for his enterprises, since he reveled in 
profit and interest upon a most extravagant scale. His biographer, 
Jacob Strieder, estimates — using Fugger’s own figures — that in 
1494 he and his two brothers invested a capital of 54,385 golden 
gulden in their firm and that seventeen years later (1511) this 
had grown to 269,091 golden gulden. Here was an increase in 



capital of about 400 per cent, or 23.5 per cent a year. But this 
does not measure the profit, since it takes no account of the sums 
withdrawn during those seventeen years by all the partners. 

However, in 1511 a new accounting is begun. Various sums 
were taken out of the business to pay off female heirs. The firm 
made a fresh start in 1511 with a capital of 196,791 golden gulden. 
After Jacob’s death, the inventory made by his nephew Anton, 
which took nearly two years to complete, revealed a capital of 
2,021,202 golden gulden. This represented a profit of 1,824,411 
golden gulden, or over 900 per cent. Here was a profit over a 
period of sixteen years of well over 50 per cent a year. But again 
it is necessary to add a considerable percentage to this account 
for that part of the earnings withdrawn for the extensive expendi- 
tures necessary to support the Fuggers’ magnificent way of life. 


The long struggle to break up the old feudal system and the 
primitive guild ethics of the towns and set in motion the capitalist 
society lengthened out into a series of steps. First there was the 
slow infiltration of money. Next came the shattering of public 
acceptance of the scholastic ethics. Then came the rise of free 
competition and the long retreat of the old guild trade monopolies. 
Next was the development of modern banking. Then came the 
rise of the large-scale industrial operator. It is because Fugger 
played a leading role in all these stages that he stands as the most 
important figure at the dawn of the capitalist era. 

It is not easy to name the precise date when modern banking 
begins. It is simple to say that it begins when loans are made, not 
in cash, but in bank credit. Banks there had been in the earliest 
times. And indeed the famous Mercato Nuovo or the Vendi 
Tavolini in the Florence of the Medici did not greatly differ in 
appearance at least and in most functions from the bankers’ loca- 
tions on the street of Janus on the north side of the Roman Forum. 
In the latter the moneylenders occupied a large ill-lighted apart- 



ment and sat in rows on high stools with their coins spread out 
before them behind a bronze screen. In the Mercato Nuovo, which 
still stands, the bankers sat on lower stools behind their tables 
covered with green cloth, ordinary paper parchment for notations, 
scales, a bowl for silver coins, and with their gold in pouches at 
their belts. 

The early Roman banker was primarily a moneychanger. A time 
came when he accepted deposits which he loaned out for his clients. 

The Florentine banker was also a moneychanger. But he was 
far more a lender of money. He loaned primarily his own money. 
But he accepted funds from others which he used in his business 
and which use he paid for. 

There is a hiatus — a long period in the early Middle Ages — 
when all traces of banks are lost. The moneylender — and chiefly 
the Jewish moneylender — alone is evident, a lone figure moving 
through an unfriendly world from fair to fair and town to town, a 
prey to knights and kings and brigands. 

It is about this time, however, that banking again shows itself 
in the business world. It appeared among the Lombards at Asti, 
Chieri, and other towns, and later at Florence. These men did a 
sort of pawnbroker business like the Jews, taking valuables of 
various sorts as collateral. 

We then find the larger merchant-adventurers drifting into the 
banking business. They were compelled to do a certain amount of 
moneylending in connection with their activities at fairs. The 
banker-merchant posted himself at the fair. Merchants went about 
buying and selling goods. Sometimes they operated by means of 
exchanges of goods, sometimes with coins — perhaps to the extent 
of 40 per cent. But there were merchants who had to have credit 
until they had disposed of their whole cargo. And so they took 
their vendors to the banker who either guaranteed payment or 
actually made payment to be repaid later. Out of this developed 
the practice of bills of exchange. 

Always there were people or institutions or rulers who felt the 
need of a safe depositor for their moneys. The English king de- 



posited his funds at times with the Knights Templars and so did 
other princes and lords. It was a logical survival of the ancient 
custom of keeping funds in the temples. In time the bankers be- 
came more than mere lenders of their own funds. They accepted 
the deposit of others’ funds. These they were at liberty to lend out. 
Such deposits were treated as demand loans to the bankers. There 
were times, however, when the depositor came for some of his 
money only to find the banker did not have it available. Under 
these circumstances the banker would take his client to another 
banker with whom he had a deposit or enjoyed credit and thus 
honor the client’s demand. After a while it became unnecessary for 
the banker to go in person to another banker to arrange this with- 
drawal. He would give his client a written order upon a neighboring 
banker for the funds he lacked. Thus checks came into use. And 
the next phase was for the client himself to give to another a 
written order upon his banker for funds. Thus the general use of 
checks came into vogue. 

All the time, the banker served to accommodate the kings and 
the petty princes and lords who needed money. When the king 
required funds on loan he might get them from a single usurer at 
first. But later he would be aided by a consortium of merchants 
who would subscribe to the loan, usually under the leadership of 
one of large means and influence among their number. Such a one 
was Fugger. And thus, we see the rise of the international banker. 

Cities, supported now by orderly taxation, would in need sell 
their revenues in advance to tax farmers who, not infrequently, 
raised the funds as the old Roman tax corporations did, by sub- 
scriptions among the well-to-do merchants. One finds running 
through all these early years ordinances and edicts and laws and 
regulations of cities and kings and public bodies and guilds cov- 
ering the subject of checks and deposits and bills of exchange and 
negotiable certificates of deposit and bank examinations and bal- 
ance sheets. Double-entry bookkeeping was perfected at Venice, 
where Fugger served his apprenticeship. The Italians, chiefly the 
Florentine bankers, were inventing names for various instruments 



and transactions — casa, banco, giornali, debitore, creditore — which 
were to become the daily countinghousehold words the world over. 
Thus men were slowly forging the instruments, weapons, and the 
jargon of the modern capitalist state that would become in time 
the mold of society. These old bankers were leaving their names 
upon the institutions and streets of the cities of Europe. In Flor- 
ence you will still find in the street names, the memory of the 
Bardi, Peruzzi, Albruzzi, Greed, and others — bankers all. 

The Fugger family had followed this evolution — first weavers, 
then lenders of money around the fairs and market places, then 
international bankers — the greatest of their time. Jacob Fugger’s 
firm had a web of branches and factories extending from Naples in 
the south and the Spanish peninsula to Hungary and Poland in 
the east and Scandinavia and England in the west. 


No canvas designed to depict the dawn of capitalism would be 
complete without a brief place for what was perhaps the first 
authentic strictly capitalist depression in Europe, produced largely 
by the operations of these new bankers. The episode is generally 
known as the failure of the Bardi and Peruzzi banks in Florence 
and it produced consequences not unlike those attending the fail- 
ure of Jay Cooke in America or Baring in England or the Credit 
Anstalt in Vienna in 1931. 

Florence had carried far the organization of her producing 
energies. Wool textiles was one of her important products. The 
homes of the townspeople and the villagers were turned into sweat- 
shops to which the merchants sent the raw wool to be processed in 
the homes. While the Church and her doctors thundered against 
interest and profit, the village priests read pastoral letters threat- 
ening the workers with a denial of the sacraments if they resisted 
the exactions of the wealthy usurers of Florence who dominated 
the system. 

A continuous supply of raw wool on the one hand and wide 



markets on the other became essential to the city’s economic 
safety. This probably led the Florentine banker-traders to Eng- 
land, where the best wool was produced. Two of the greatest 
Florentine houses, the Bardi and the Peruzzi, began extensive 
operations in England in the latter part of the thirteenth and the 
beginning of the fourteenth century. They made large loans first 
to Henry III and later to Edward II and Edward III, but mainly 
to the latter. In return they got the privilege of trading in England, 
which was otherwise closed to foreign merchants, and the privilege 
of buying wool for the Florentine market. 

It is these loans to Edward III which are called by historians 
the cause of the failures of the Bardi and Peruzzi. But this is a 
very considerable oversimplification. By 1337, when Edward III 
launched that bootless century of struggle known as the Hundred 
Years’ War by invading France, he owed the Bardi 62,000 pounds 
and the Peruzzi 35,000 pounds. But he immediately made enor- 
mous additional loans to finance his ambitious design to seize the 
crown of France from Philip VI. By 1343, when the first phase of 
that quixotic adventure came to an end, he is said to have owed 
900,000 pounds to the Bardi and 600,000 pounds to the Peruzzi. 
Sapori, a recent student of this historic episode, thinks the sums 
exaggerated and that they were nearer 500,000 and 400,000 pounds 

Edward had promised to pay the principal and interest of these 
loans in coin, and his undertaking was guaranteed by the Arch- 
bishop of Canterbury and the Bishop of Lincoln. So eager was 
the rash Edward for these sums that, upon completing the arrange- 
ment, Edward gave to “the merchants of the Bardi society” 30,000 
pounds sterling, to the “merchants of the Peruzzi society,” 20,000 
pounds sterling, and “in consideration of the great help given the 
king,” 500 marks to a Peruzzi agent in England and, for the same 
reason, 500 marks to the wife of another agent and to the wife of 
a Bardi agent. Wives of two other agents got 200 pounds each. It 
sounds as if two great American banking houses managed an 
American loan to the government of Chile on a 20 per cent basis, 



while the partners in the two banking houses got a several-hundred- 
thousand-dollar bonus from the Chilean president, who also dis* 
tributed the largess among the South American agents of the 
banking houses and their wives. Thus, commercial bribery had 
already made its way into the investment banking business. 

But all this time Florence, rushing forward in the first incident 
of uncontrolled expansion of the capitalist era, was moving deeper 
and deeper into debt. Merchants were making profits and deposit- 
ing them with the Bardi, the Peruzzi, the Mozzi, the Frescobaldi, 
the Scali, and also investing in various bond issues underwritten 
and managed by these houses, but chiefly by the Bardi and 
Peruzzi. Competition with their wool industry was growing from 
England and the Flemish weavers. But as they produced ever 
more they were ceaselessly seeking to expand their markets. Flor- 
ence, an economic unit like modern England, imported raw ma- 
terials and exported finished products. She enjoyed her expansion 
through the strategic activities of her rich bankers, who grew 
wealthy milking European monarchs and princes and at the same 
time using their loans as weapons to force Florentine products into 
those old custom-sealed European countries and cities. 

One market, among others, was of great value to Florence — the 
city of Lucca. This city was a commercial battleground between 
the merchants of Florence and Pisa. And out of this situation it 
became the victim of an episode that depicts strikingly the inheri- 
tance of violence that deformed the early struggles of primitive 
capitalism. A band of German mercenaries seized Lucca and offered 
to sell it to the city of Pisa. Pisa agreed to pay 60,000 golden florins 
and made a down payment of 13,000 florins, which it was destined 
to lose when Florence armed to balk this sale of its valued market 
to its chief rival. Later certain Florentine merchants and bankers 
— including beyond doubt Bardi and Peruzzi — offered the German 
mercenaries 80,000 florins. They would thus control Lucca as a 
market for their products and own its customhouses and its tax 
revenues. It was as if a few leading merchants and manufacturers 
of Philadelphia were to propose to buy Pittsburgh from a mutinous 



regiment of the New York National Guard that had seized the 
latter city and was now peddling it around the East. But Florence, 
still ruled by the remnant of the old Guelph spirit, protested against 
this immoral purchase of a city’s population like so many slaves. 
Finally the captors of Lucca knocked the city down to a Genoese 
merchant-adventurer named Gherardino Spinola for 30,000 florins. 
The outcome of this was war between Florence and Pisa. 

The first effect of the war was a demand for war loans, which 
the banking houses were called upon to float. And this came at a 
time when Edward III was marching his armies around Flanders 
and making new appeals for larger advances from the Bardi and 

The competition of the English and Flemish wool weavers had 
been undermining the trade of Florence much as the competition 
of the Carolinas cut into the business of the New England textile 
industry and as the competition of the East cut into the textile 
industry of Manchester. Production in Florence fell off. The streets 
were filled with the unemployed. Merchants who had large deposits 
with the Bardi, the Peruzzi, the Frescobaldi, and others were call- 
ing for their funds. Some of the smaller bankers failed. Indignation 
against all the bankers was rising. Florence faced a crisis not 
unlike that which faced America in 1933 or Germany in 1932. 
Nothing could save the great bankers but a moratorium. Disturb- 
ing rumors floated in from Flanders, where Edward’s generals were 1 
having but small success. In this crisis this old city, where the 
popular party had always been strong, with its active popolo 
minuto, which hated the Ghibellines not only because they repre- 
sented the philosophy of the economic royalist, but of external 
interference and domination, submitted to the device of dictator- 
ship. In 1342 that fantastic adventurer, Walter of Brienne, a 
Frenchman who styled himself the Duke of Athens, was made 
dictator through the machinations of the bankers. He proclaimed 
a moratorium on private debt for three years, which saved them. 

But, having come into power, he plotted immediately for com- 
plete mastery. He suspended payment of the interest on the public 



debt and planned gradually to extinguish it by progressive repu- 
diation, which promptly brought upon his head the wrath of the 
bankers. In 1343 the distress of the city was so great, the fortunes 
of the war so melancholy, the anger against the dictator so general 
that the people poured into the streets in an unrestrained uprising. 
They looted the palace of the Bardi, taking it is said, valuables to 
the amount of 30,000 florins. The dictator was compelled to resign 
and flee from the city. Certain Neapolitan bankers who had loans 
outstanding in Florence called them. The news came of Edward’s 
reverses that brought the Hundred Years’ War to its first pause in 
1343, and Edward delivered the crowning blow by defaulting upon 
his loans. Immediately the Peruzzi bank failed. And within a year 
the great Bardi bank crashed. They carried with them most of the 
bankers of Florence. The disaster shook all Europe and produced 
in those cities where capitalist organization had proceeded to any 
length, such as Venice and Genoa, the most depressing conse- 
quences. Excessive debt, overexpanded industry, concentration of 
money and power and wealth, the extravagance of governments, the 
destructive power of war had made for Europe its first great capi- 
talist depression in the modern era. 


Like most of the great bankers from Jacques Coeur and William 
de la Pole in the dawn of capitalism to J. P. Morgan and the 
Mitsui in our own day, Fugger found it essential to his larger 
schemes to maintain an intimate association with the sovereign. 
And the sovereign, as Fugger mounted to power, was Maximilian 
I, who, like all the rulers of history, from Pericles and Caesar to 
Roosevelt and Churchill, found it essential to maintain an in- 
timate association with the sources of credit. Fugger established a 
close relationship with the impecunious and unstable Maximilian, 
the “last knight of Europe.” When the hard-pressed Hapsburg 
needed funds the faithful Fugger with his seemingly inexhaustible 
resources was at hand. But if Fugger was a never-failing well of 



cash to the Emperor, his majesty was a never-failing source of new 
privileges and monopolies and profits to Fugger. If Fugger had in 
his vaults what Maximilian required, Maximilian had in his rich 
realm priceless metal and other resources that were indispensable 
to the acquisitive Jacob. 

Maximilian was Emperor of the Holy Roman Empire, that pale 
imperial shadow of power which was slowly vanishing out of 
Europe. But of far more importance to him was the struggle for 
mastery that was going on in Germany, as in every other country, 
between the king on one side and the numerous feudal lords on 
the other. As in the thinly concealed struggle which smolders today 
in America between the local governments and the Federal govern- 
ment over the rising supremacy of the latter, Germany was turning 
to strong central government to solve her little-understood prob- 
lems. The spirit of revolt in religion, the expansion of knowledge, 
the awakening curiosity of the masses, dynastic and commercial 
and technological and political energies kept the population in a 
ferment, but, perhaps, in the center of all this, accentuating and 
stimulating all the other elements of unrest, were economic forces. 

Probably more than anything else the prime moving spirit of 
turbulence, controversy, and change was money. For at least two 
hundred years the feudal world was disintegrating. Men knew 
things were wrong. They debated and argued and fought over the 
causes and the cures. They held conferences all over Germany to 
inquire what was amiss and how it was to be set right. But they 
never seemed to get around to the real cause or even to talk about 
it. The struggle resolved itself now into bitter religious controver- 
sies, now into wars between princelings and estates, now into po- 
litical debates. What they saw was a political upheaval, the effort 
of the king to make himself master against the savage opposition 
of the lords. They took measures against this. But they took no 
measures against the one potent energy that entered the system 
like a malevolent germ — money. So that as you examine the long 
history of the decline of the Middle Ages you are struck by the 
fact that nothing contributed so much to destroying the existing 



order as the measures that were taken by the politicians of the 
day to save it. 

For several hundred years money — coins — had been trickling 
into the hands of rulers and people. After the downfall of the 
Roman Empire, coins began to disappear. It is estimated that in 
the year a.d. 5 1 8 there were about $3 70,000,000 of gold and silver in 
Europe. By a.d. 806 this had dwindled to $160,000,000, or about 
half. Whether these metals were destroyed or merely hidden away 
or lost cannot be said. But after a.d. 800 the production — chiefly 
in the Holy Roman Empire — was more than sufficient to make 
good the yearly disappearance, and in the fourteenth and fifteenth 
century the production was notably increased. Doubtless, much of 
the hidden precious metals began to reappear. Estimates of the 
precise quantities in use must be taken with a good deal of caution. 
Certainly as men became sensible of the value of these metals in 
exchange the hunt for them was quickened. All through these years 
one reads of the adventures of the alchemists who were being 
grubstaked by various wealthy men and rulers in the hope that 
they might produce the gold so eagerly desired. Kings began to 
impose and enforce the most drastic measures to increase the 
supply of precious metals in their kingdoms. In England, for in- 
stance, every merchant was compelled to import a certain amount 
of coin or bullion in every ship, and export of the metal was 

For a while these metal coins were little more than glorified 
commodities — gold, silver, copper — confronting, as Marx puts it, 
all other commodities. But coins were not consumed as other com- 
modities were and they acquired a velocity other commodities 
could not have. Workers wanted their wages in coins. Farmers 
preferred to exchange their produce for coins where possible. 
They preferred to pay their dues and services in money, even their 
rent. The lords preferred to have it so. The lord could now indulge 
in luxuries. People bought more and more from merchants who 
in turn grew wealthy. The banker became important as credit 
grew. No longer could men — merchants, bankers, townspeople — 



tolerate the disorders that grew out of the petty wars and feuds and 
brigandage of the numerous lords and knights. They turned to 
the crown for order, stability, and protection against the feudal 
barons. The king — Maximilian — had no revenues from the king- 
dom save those from his own estate — the Tirol. Soldiers he could 
get from his vassal lords by levy under their feudal obligations when 
he wished to fight the heathen or a foreign foe. But for use against 
the lords themselves in the great struggle for mastery of Germany, 
the emperor had to have a mercenary army, and this required 
cash. He could get enough cash only by borrowing from the 
bankers, who in turn, through consortiums, could raise the moneys 
amongst the merchants. 

Thus king and towns and merchants were drawn together by 
the inescapable necessities of this new money economy. This im- 
mense need for money for emperor, and pope too, for that matter, 
laid too great a strain upon the old scholastic ethics of Aquinas, 
for king and pope needed the rich man as the source of credit, and 
this, in turn, brought about a frank abandonment of the “just price” 
and the proscription against money wealth and interest. And thus 
the merchants and bankers waxed mighty, became the most pow- 
erful subjects, challenged the power of the lords, built castles of 
their own, acquired titles and estates, and became, in time, the 
lords of creation. 

Maximilian was one of those frail vessels into which is poured 
the destinies of a people in a moment of crisis. He was young, well 
proportioned, ruddy and healthy, restless, ambitious, and not 
wholly devoid of ability. He lived simply, ate moderately, and 
avoided those copious draughts of Rhenish wine and beer that 
besotted the German nobility. The Tirolese peasants adored him 
because he was brave and adventurous as a hunter and a glamorous 
figure in the courtyard tilts. He enjoyed immense popularity with 
the younger nobles, was gracious and charming in his personal 
relationships, encouraged artists and scholars, and, in general, ex- 
hibited the qualities of urbanity, heartiness, ebullient good nature 



and courage that became one who was called the “last knight of 

But he was unstable, flighty, always plotting for supreme power. 
He engaged in one calamitous war after another. He was forever 
fabricating new devices for getting more money. Even as an old 
man in 1518 he was talking of another crusade against the infidel. 
Declining toward the end of his reign into the most humiliating 
poverty, embittered by the embarrassments to which it exposed 
him, he left the Tirol, traveled down the Inn and the Danube, 
where, prostrated by a long illness, he died. 

It was to this unstable, chimerical, and tolerant prince that Jacob 
Fugger attached himself as chief banker. And the heights to which 
the great Augsburg banker rose in the Hapsburg hierarchy will be 
seen in the part he took in naming the successor to Maximilian’s 

Charles I, King of Spain, was a Hapsburg. He was the elder son 
of the Archduke Philip, Maximilian’s only son. Philip had married 
the daughter of Ferdinand and Isabella of Spain and died before 
those monarchs. His son succeeded them on the throne of Spain as 
Charles I. Maximilian had decided to make his grandson, Charles, 
Holy Roman Emperor to succeed him. 

But there was another candidate in the field, Francis I of France. 
The selection of the emperor was in the hands of the electors, a 
small group of dukes and archbishops. The Margrave of Branden- 
burg, the Count Palatine of the Rhine, and the electors of Mainz 
and of Trier were practical gentlemen and their votes could be 
had upon one condition only — Maximilian had to be able to offer 
a bigger price than Francis. The fight started at the Diet of Augs- 
burg in 1518. Maximilian was growing old. His treasury was 
empty. And though he talked of his plans to launch another crusade 
he could not pay the tavern bills of his courtiers. Nevertheless, 
there, supported by the financial resources of Fugger, Maximilian 
was able to secure the promise of support for the Spanish king. 

The negotiations, reduced to the grossest commercial terms, 
reached a point where the Margrave of Brandenburg had the de- 



ciding vote. Fugger undertook to purchase the noble miscreant. 
Francis had offered him a rich French wife with a large dowry. 
But Fugger countered with the granddaughter of Maximilian — the 
sister of Charles of Spain — and 300,000 Rhenish gulden. Fugger 
guaranteed to deliver 100,000 in coin as a down payment as soon 
as Charles was elected. Large sums had to be provided from various 
sources, including immense amounts to be collected in Spain to 
complete the purchase of the other electors. Maximilian had com- 
missioned Fugger to carry out these arrangements. 

But the aging Maximilian died shortly thereafter, and Charles 
I assumed the direction of his own campaign. Almost his first act 
was to displace Fugger. He turned over to the Welsers, Fugger’s 
chief rival in Augsburg, the task of moving over 300,000 gulden 
collected in Spain to control the election. 

Fugger was enraged at this. His whole position as the banker 
for the most powerful royal house in Europe, the Hapsburgs, was 
threatened. He lost no time acting. He let Charles know that he 
had but to throw his support to the French to blast the expecta- 
tions of the refractory Spanish monarch. He got in touch with the 
electors. Soon Charles learned that an election consists not merely 
in making promises to those who have votes to sell but in con- 
vincing the purchased electors that the promises will be kept. 
When Charles’ agents got down to brass tacks with the electors 
they made it plain that they wished Fugger to manage the finan- 
cial arrangements by which they had to be bribed not to sell the 
crown of their country to a Frenchman. They insisted that they 
would be satisfied with nothing less than Fugger’s guarantee of 
the payment of their respective shares. 

Fugger was called back to the helm in triumph. In the dis- 
charge of this important commission, which resulted in the elec- 
tion of Charles of Spain as Holy Roman Emperor under the title 
of Charles V in 1519, Fugger extended credits of over half a mil- 
lion gulden in gold. His fame now reached its highest point. After 
this he remained the undisputed chief banker and financial ad- 
viser of the Emperor. Augsburgers said with pride that the name 



of Fugger was known throughout the world. He became almost 
a legendary figure. Luther related, with a touch of awe despite 
his hatred of Fugger’s predatory class and his feud with Fugger 
himself, how the Bishop of Brixen, one of Peutinger’s literary 
companions, had died in Rome, leaving a scarcely legible scrap 
of paper, and how Pope Julius sent it to Fugger ’s agent in Rome 
to be deciphered. The agent recognized it as evidence of a deposit 
of several hundred thousand gulden which the good Bishop had 
with the Fugger house. When the Pope asked how soon the money 
could be sent, Fugger’s factor replied: “At any hour.” The Pope 
turned to the French and English cardinals present and asked: 
“Could your kings also deliver three tons of gold in an hour?” 
When they said no, his Holiness replied: “But that is what a 
citizen of Augsburg can do.” 

The astute Augsburg banker made more than his interest and 
his “gifts” out of his sovereign. The function of banker — ever- 
ready and loyal banker and financial adviser — opened for him the 
door to priceless privileges in Maximilian’s ducal domain of the 
Tirol, rich in natural resources — that same Tirol with its mines 
which stimulated the patriotic yearning of the twentieth-century 
German statesmen for Anschluss. He obtained from the debt- 
ridden royal spendthrift those invaluable copper and silver mo- 
nopolies that became the chief source of his great fortune. 

It would be unfair to Fugger, however, to say that his loyalty 
to the Hapsburgs was the mere fruit of his predatory plans. He 
was banker, merchant, industrialist, Catholic and German. What 
were the percentages in which these ingredients fused in his im- 
perious nature, it is not, of course, possible to say. He felt a 
strong tie to the Hapsburg house. His political philosophy, based 
upon his commercial interests, drew him inevitably to the monarch 
whose struggle against the principalities and estates advanced 
the cause of order and stability in a stronger central government, 
so essential to the rising merchant class. He gave to the Haps- 
burg drive for strong central government that kind of zealous 
support that the industrial magnate of Mark Hanna’s day gave 



to McKinley and Taft and that their successors today give with 
equal vigor to the champions of local rule against the forces of 
Federal power, because their changing interests now have shifted. 
But he doubtless felt a strong personal attachment to Maxi- 
milian. Through all that bewildered sovereign’s battles against 
the old order, his frantic efforts to obtain military and financial 
aid from the hostile lords, in Diet after Diet in which, as in Augs- 
burg, the estates refused his appeal for arms and men or at Trier 
when they refused his request for the common penny, Fugger 
stood by his side and, in the last extremity, always opened his 
brimming chests of gold. 

He must have been touched as he beheld his own growing 
wealth beside the ever-increasing poverty of his sovereign. At 
the Congress of Vienna, where Fugger, surrounded by his rich 
agents and the members of his family, magnificently attired, con- 
ferred upon favored nobles rich gifts of gold and pearls and 
other precious stones, the impecunious Emperor strode about 
resplendent in costly jewels that his rich banker had secretly 
loaned him to enable him to play more splendidly the role of 

Fugger must indeed have been fully conscious that he occupied 
a sovereign eminence in a province within the empire — the new 
province, the great principality of money. For we find him ad- 
dressing the Emperor .Charles V in terms used then only by great 
and powerful vassals who, under the formal language of alle- 
giance, talked to kings with the assurance of equals . 1 

1 Charles V was slow in repaying the large sums advanced by Fugger to accom- 
plish Charles’ election to the imperial throne. Fugger, his patience taxed by the 
royal delinquent, wrote to the Emperor the following extraordinary letter : 

His Most Serene, All-Powerful Roman Emperor, and most Gracious Lord ! 

Your Royal Majesty is undoubtedly well aware of the extent to which I and 
my nephews have always been inclined to serve the House of Austria, and in all 
submissiveness to promote its welfare and its rise. For that reason, we co-operated 
with the former Emperor Maximilian, Your Imperial Majesty’s forefather, and, 
in loyal subjection to His Majesty, to secure the Imperial Crown for Your Imperial 
Majesty, pledged ourselves to several princes, who placed their confidence and 
trust in me as perhaps in no one else. We also, when Your Imperial Majesty’s 



He began to play the magnifico. In 1511 he was made a count. 
But already he had begun to acquire great estates. Before 1511 
he had acquired at least four splendid domains — two of them 
from the Emperor himself, all in Swabia, and one of them very 
near to Augsburg. He had also an estate or two in the Tirol and 
in Hungary, and his magnificent palace in Augsburg, filled with 
the paintings and sculptures of the best artists in Europe, was a 
treasure house of art. Chiefest of all, like that other magnifico 
of the last century, J. Pierpont Morgan, he was an inveterate 
collector of valuable and rare and beautiful manuscripts and 
books. His library at his death was already the finest in Germany 
and after his death, through additions of his family, became the 
most famous in Europe. Indeed the greater part of its treasures 
was brought together by Jacob Fugger’s successors. It is worth 
recording here that 125 years after Jacob Fugger’s death, this 
famous library was sold by Count Philip Edward Fugger to the 
emperor for 15,000 florins — about a fifth of the sum that had 
been offered for it in an earlier day, and when the imperial libra- 

appointed delegates were treating for the completion of the above-mentioned 
undertaking, furnished a considerable sum of money which was secured, not from 
me and my nephews alone, but from some of my good friends at heavy cost, 
so that the excellent nobles achieved success to the great honor and well-being of 
Your Imperial Majesty. 

It is also well known that Your Majesty without me might not have acquired 
the Imperial Crown, as I can attest with the written statement of all the delegates 
of Your Imperial Majesty. And in all this I have looked not to my own profit. 
For if I had withdrawn my support from the House of Austria and transferred it 
to France, I should have won large profit and much money, which were at that 
time offered to me. But what disadvantage would have risen thereby for the 
House of Austria, Your Imperial Majesty with your deep comprehension may 
well conceive. 

Taking all this into consideration, my respectful request to Your Imperial 
Majesty is that you will graciously recognize my faithful, humble service, dedi- 
cated to the greater well-being of Your Imperial Majesty, and that you will order 
that the money which I have paid out, together with the interest upon it, shall be 
reckoned up and paid, without further delay. In order to deserve that from Your 
Imperial Majesty, I pledge myself to be faithful in all humility, and I hereby 
commend myself as faithful at all times to Your Imperial Majesty. 

Your Imperial Majesty’s most humble servant, 

Jacob Fugger 



rian went to Augsburg to fetch the collection to Vienna the town 
councilors prevented him at the instance of the creditors of the 
Fugger family, whose wealth and power and glory had by this 
time departed. 

Jacob, like many of the wealthy Christian men of wealth of his 
day, was a generous but never secret dispenser of philanthropy, 
giving to monasteries, churches, almshouses, and the poor. For one 
of these benevolences he is indeed famous. This was his erection 
of a model housing project — fifty cottages housing two families 
each, still known as The Fuggerei — in the suburbs of Augsburg 
to offer, at very low rents, decent homes to the underprivileged 
workers of the city. It is perhaps the first instance of a low-cost 
housing enterprise in Europe. And that the job was well done is 
attested by the fact that the houses remain in good condition and 
are still tenanted. 

Always it was Fugger’s wish to enlarge and embroider the 
visible evidences of his wealth and power, partly, perhaps, to 
gratify his vanity, partly to add to the prestige of the House of 

For always this great House of Fugger assumed an identity in 
his mind separate from that of its members, and the proud mer- 
chant studied ceaselessly to ensure its immortality and its mag- 

The Fugger partnership contract was built around this dynastic 
dream. The three Fugger brothers were equal partners. Upon the 
death of any brother the remaining brothers were to act as direc- 
tors and to select from among the male heirs one worthy to be 
trained to take his place as a director when needed. When all of 
the brothers were dead the two directors, thus named from among 
the heirs, would assume command and train a third for the 

Female heirs and those in orders were excluded from the busi- 
ness. All heirs were compelled to leave their inherited share in 
the business for three years, after which they could, if they wished, 
withdraw it only gradually. The great mining interests were seg- 



regated from other enterprises, and only male heirs were per- 
mitted to inherit them. Various devices with penalties were 
contrived in the business structure to ensure its permanence. 

But Fugger, who knew so well how to manage the great craft 
he captained, knew little enough of the perils of the seas it sailed, 
Anton Fugger, a nephew, succeeded to the chief directorship on 
Jacob’s death. Before he died in 1560 the great Fugger house 
was as deeply morassed in the financial adventures of the House 
of Hapsburg as the Bardi and Peruzzi were in the finances of 
Edward III. When Anton’s son Marcus took over the reins, he 
saw the Fugger riches slipping out of the company’s hands. Most 
of the wealth amassed by Jacob was dissipated in the lifetime of 
his grand-nephew. A century later the only part of that wealth 
that remained was what had been invested in lands. 


Greater than any emperor, richer in revenue than any temporal 
monarch, was the pope of Rome. The papacy was then, as it is now, 
<v highly organized superstate with its branches in every village, 
its parochial, provincial, and national officials, diplomats, armies, 
secret agents. Its primary function was the salvation of souls, 
but in the performance of that duty it had contrived an immense 
machine. Its founder had administered his great enterprise with 
literally no plant capacity beyond the open fields, the blue sky, 
and the simple habiliments of a mendicant. But the modern 
Church continued his ministry from the palaces of its wealthy 
prelates and a vast physical structure that required an endless 
flow of revenues into its treasury. 

Inevitably the Church had developed an extensive system of 
papal taxes originating in little contributions from every corner 
of the world, flowing into larger pools in the numerous dioceses, 
finally making their way to Rome. 

For several centuries the pope had employed the services of 
various bankers — chiefly Italians. But after 1502 Jacob Fugger 



elbowed all other rivals aside as the foremost fiscal agent of Rome. 
He collected the papal revenues in Germany, Holland, Hungary, 
and the Scandinavian countries. He made advances to the pope, 
recouping his loans out of these collections. Similarly he trans- 
ported papal moneys to diplomats, monarchs, generals, missions 
all over Europe. 

His place in history in connection with this traffic, however, 
rests chiefly upon the part he played in the collection of indulgence 
money and the sums paid by wealthy candidates for Church bene- 
fices for their promotion. His role here was a sinister one. There 
seems little doubt that he artfully established himself as what in 
modern American parlance would be called the “contact man” 
with the Holy See in the distribution of Church honors and bene- 
fices in Germany. The ambitious cleric seeking the purple of the 
monsignori or the pallium of the archbishop as a rule had “to see 
Fugger.” He was required to put up an immense sum with the 
Roman dataria, and Fugger was the gentleman who knew how 
to make the best terms for him, how to provide the money and the 
means of repaying it. Indeed, Fugger once boasted that he “had 
been concerned in the appointment of all the German bishops.” 

It was out of this traffic, denounced openly as simony by the 
Church, but practiced behind the scenes by its prelates from 
pontiff down, that Fugger got for himself a dubious immortality 
in that historic episode that precipitated Martin Luther’s break 
with the Catholic Church. 

In the fall of 1517, faithful Catholics gathered in the Catholic 
churches in the diocese of Mainz to hear a famous preacher por- 
tray for them the inspiring theme of a great mother basilica for 
Christendom — St. Peter’s at Rome — which Pope Leo X planned 
to complete. What the preacher wanted was funds — money for 
the holy project. To those who would contribute, the Pontiff had 
offered a plenary indulgence. The faithful gave, at least for a 
while. But the success of the campaign for funds was interrupted 
by an expose of the sinister facts behind it. 

Young Albrecht, Margrave of Brandenburg, had an inordinate 



ambition to collect archbishoprics for himself. Having achieved 
through the influence of his brother, the Elector of Brandenburg, 
the see of Brandenburg, he next succeeded in becoming archbishop 
of Magdeburg, in 1513, at the age of twenty-three. This was a 
hitherto unheard-of achievement. But he decided to seek also 
the archbishopric of Mainz when that post became open, in 1514, 
by the death of its incumbent. To command three dioceses was 
an exhibition of ecclesiastical greed which the avaricious Floren- 
tine party in power at Rome knew how to exploit. The dataria — 
the sacred bureau concerned with graces and benefices — informed 
the audacious Albrecht that the business could be arranged if he 
could raise 10,000 gulden in addition to the fifteen or twenty 
thousand which he would ordinarily have to pay for such a dio- 
cese. Albrecht’s chance of raising so much money out of the over- 
taxed communicants of Mainz was slim, since that see had had 
two short-lived archbishops, each of whom had paid fourteen 
thousand ducats for his elevation. The diocese was bankrupt and 
hence would not yield further funds to the ordinary appeal. Some 
more effective squeeze was necessary. 

The matter, apparently, was arranged in Rome by Johan Zinc, 
the Augsburg ecclesiastic who was in the pay of Fugger. Albrecht 
would borrow the 10,000 gulden needed from Fugger. Pope Leo 
would grant to him in Mainz and Brandenburg a plenary in- 
dulgence, ostensibly for the building of St. Peter’s. In fact, how- 
ever, the “gate” would be split fifty-fifty between the Pope and 
the Archbishop, like one of those American prize-fight benefits 
for the Milk Fund where the Milk Fund gets a modest percentage 
while the promoters and fighters get the rest, and all the bally- 
hoo is on the Milk Fund. 

With this privilege granted to him, Albrecht was in a position 
to borrow the needed ten thousand from Fugger, while the banker, 
as security, took over the collection of the indulgence money. 
But it was important that there should be no mischance in selling 
the indulgences to the faithful. Therefore Albrecht and his banker- 



managers did what an American Y.M.C.A. drive or Community 
Chest campaign does. They employed a professional high-pressure 
drive manager. There was at least one such person in Germany — 
John Tetzel, the famous indulgence preacher, a sort of Billy 
Sunday who had shown in other dioceses that he could bring the 
pennies tinkling into the collection boxes. Tetzel made a specialty 
of preaching indulgence drives. 

With this organization — Tetzel managing the exhortation and 
Fugger managing the money — Albrecht set out to gather in 
Mainz and Brandenburg the ten thousand he had borrowed from 
Fugger and the fifteen or twenty thousand he was to pay besides. 
Tetzel went from town to town and from church to church. He 
preached the gospel of the full remission of the temporal punish- 
ment due to sin for those who would contribute to build St. Peter’s, 
without disclosing the real object of the drive. The contributions 
were put into sealed boxes, counted at Fugger’s office in Augsburg 
in the presence of representatives of Albrecht, and turned over to 
the banker to be divided in accordance with the deal. 

At this time Martin Luther was engaged in his rising contro- 
versy with the Church over this very question of indulgences. 
The Albrecht-Fugger-Tetzel performances aroused his indigna- 
tion, and he let fly at the whole incident in which an archbishop 
“sent Fugger’s cutpurses throughout the land” to collect money 
under the guise of aiding a sacred cause to pay off a loan to the 
Augsburg usurer. Luther denounced Fugger in the roundest 
terms. He piled his scorn upon the banker’s trade practices. While 
Luther based his attack upon purely religious grounds, his ful- 
minations found an answering echo in the minds of the practical 
German burghers who saw in the whole indulgence and benefice 
racket a scheme to gather up the all-too-meager supplies of Ger- 
man coin and drain it off under hypocritical pretenses to Italy. 
The incident produced so violent an effect upon Luther’s mind 
that it precipitated his decision to bring the whole subject to an 
issue, and, within two months of the commencement of the Tetzel 



preaching campaign, the revolutionary monk nailed upon the 
gates of the town of Wittenberg his famous Ninety-five Theses. 


If you will go back to the end of the fifteenth century to the 
ancient city of Neusohl, you will come upon something that 
strangely resembles in significance the Butte, Montana, of today 
or perhaps the oil regions of Pennsylvania in the ’seventies. As 
for the Augsburg of Fugger ’s time, it bore to the rising copper 
industry the same relation which Cleveland bore to the oil regions 
in Rockefeller’s time. For there in Augsburg and in the copper 
country of the Tirol and of Hungary, Jacob Fugger was laying 
the foundations of the modern industrial system. There, the 
musty records of the era reveal, were the seeds of the coming 
industrial organization, its companies, its subsidiaries, its cartels, 
its patient and intriguing monopolists, its trust busters, its anti- 
monopoly drives with its prosecutions, investigations, and failures. 

It would not do to assert that Fugger invented any of the 
devices that became the familiar tools of his monopolist suc- 
cessors, any more than it would be true to say that the Rocke- 
fellers, Morgans, Carnegies, and Harrimans invented the devices 
by which they built the corporate system of our day. But Fugger 
organized these devices, used them with audacity and skill. And 
through them he acquired most of the vast fortune that made 
him the richest man of his world. It was this role of industrial 
pioneer that gives him his chief claim upon history. 

These activities were carried on in the copper and silver indus- 
tries. The scene of these exploits was in the mining districts of 
Germany, in the Tirol, and in Hungary. From about the middle 
of the fifteenth century German merchants, chiefly from Augs- 
burg, began to trade in the copper of the Tirol. The metal was 
produced by many small operators. The mines, of course, under 
the feudal system, were the property of the Duke, the owners 
holding them as feudal grants. The Duke, therefore, was entitled 



to a share of all the copper and silver taken out of them by the 
operators. Here was the foundation of the mineral and oil royalty 
that still persists. 

The Augsburg merchants got into the business purely as traders, 
taking the product of the Tirolese operators. However, the Duke — 
Sigismund I — like all his contemporaries, constantly needed 
funds. He was an habitual borrower from merchants or a con- 
sortium of merchants in Augsburg, pledging his copper and silver 
royalties for the loans. Or, since he had the power to command 
the entire output of a mine, he might proclaim himself the only 
purchaser of the whole output at his own price and grant the 
handling of this to some merchant. These were called copper deals, 
silver deals, and so on. 

Up to 1491 Hans Baumgartner, a rich Kufstein merchant, was 
the chief beneficiary of the Duke’s copper deals. But in that year 
Fugger managed to shoulder Baumgartner out. From this point 
on Fugger felt the infection of that savage organism, the dream 
of the monopolist. And for the next thirty-two years he patiently 
schemed and bribed and intrigued to become copper king of the 
sixteenth century. 

This, of course, he could not do unless he could control the 
resources of Hungary. But trade in Hungary was practically 
closed to the German merchant even if it were not too risky, for 
Matthias, the Hungarian king, was at war with the Holy Roman 
Empire. Maximilian, son of the Emperor, took the field against 
Matthias and defeated him after a bloody war, memorable for the 
fact that in it bombs were first used. Maximilian ended this 
struggle with a great victory, the death of Matthias, the eleva- 
tion of Vladislav of Bohemia to the throne of Hungary, and the 
famous Peace of Pressburg. By this treaty Vladislav agreed that 
upon failure of male issue the crown of Saint Stephen should 
fall to the Hapsburgs. 

With Hungary rendered safe for trade, Jacob Fugger made 
his entry. There an able engineer, Johann Thurzo, had risen to 
importance in the metals industry. He had perfected a method 



of rescuing flooded mines by means of a hydraulic pump and 
he had made great advances in the art of separating metals. 
What Thurzo needed was money. Fugger needed Thurzo’s tech- 
nical skill, and so they united to form the Fugger-Thurzo Com- 
pany, much as John D. Rockefeller, the money man, united with 
Andrews, the practical oil refiner, to form the first unit of Stand- 
ard Oil. And this company, backed by the political influence of 
Maximilian and the power of Vladislav, acquired a dominating 
position in Hungarian copper and silver production. 

But Fugger never relaxed his intrigues to hold that position and 
to consolidate it. His strength lay in his relationship with the Haps- 
burg rulers and, of course, his own growing fortune. He wished to 
leave nothing to chance or to take the risk of any repudiation of 
the Pressburg convention. Accordingly, he schemed for years to 
unite the heirs of Maximilian with the daughters of Vladislav. 
And this he succeeded in doing at the Congress of Vienna in 1515, 
when the daughter of Vladislav, Anna, was betrothed to the 
grandson of Maximilian, Ferdinand. Fugger’s biographer records 
that Fugger’s expense account charged to the Fugger-Thurzo 
firm at this Congress was 10,000 gulden. 

The Hungarian copper and silver trade was dominated by a 
subsidiary company, one half of which belonged to the Fugger 
Company and the other half to the Thurzo Company. It was 
known as the Fugger-Thurzo Company and it engaged entirely 
in the mining, smelting, and production of copper. Its entire 
product was sold to its constituent companies. The Fugger Com- 
pany took half its product; the Thurzo Company took half. These 
two companies then sold their respective shares and pocketed the 

The Fugger-Thurzo Company operated mines, some of which 
they bought and some of which were leased. They handled the 
ores in their own smelting plants and treated the product in their 
own rolling and plate mills. They had three principal plants, at 
Neusohl, at Hochkirch, and at Fuggerau — an industrial town, 
forerunner of the modern Gary. The company employed several 



hundred workers in the mines and mills. This was probably the 
largest-scale business which had developed up to that time. 

All through this period one perceives the continual efforts of 
Fugger to widen and cement his dominion over copper. Like the 
modern American trust barons whose first experiments in mo- 
nopoly were made through trade agreements, Fugger’s first efforts 
were made through cartels. As early as 1498 he made a cartel 
agreement with Herwart and Gossembrot of Augsburg and Hans 
Baumgartner of Kufstein. They pooled their supplies of Tirolese 
copper and sold them in Venice wholly through Fugger’s factor, 
Hans Keller, thus eliminating competition and keeping the price 
and profits up. 

In 1515 the Emperor Maximilian granted the entire copper 
product of Schwaz, richest mining district of the Tirol, to a con- 
sortium of Fugger and Hochstetter. Thus Fugger controlled the 
copper output of the Tirol through this consortium and of Hun- 
gary through the Fugger-Thurzo Company. It was agreed that 
Tirolese copper was to be sold only in upper Germany and Italy 
and the Hungarian output only in the Netherlands. These machi- 
nations became known, and Fugger found himself greeted by a 
howl of rage from the small businessmen of Germany. Frequent 
attacks were made upon him in the German Reichstag. Finally the 
imperial advocate or attorney general instituted proceedings 
against him for violating the antimonopoly laws of Germany. The 
great German merchant had to open the doors of his palace to the 
process server. The technique of subpoena dodging had not yet 
been perfected. About the same time, the town fathers of Augsburg 
rose against him and started proceedings to bring him to book. 

In this crisis Fugger did what the American trust magnate has 
always done. He mobilized his lawyers and turned the heat of 
political influence upon the officials. He communicated with Em- 
peror Charles V who was at Burgos. Charles wrote to the chief 
advocate directing him to end his prosecution. He wrote also to 
the Archduke Ferdinand to quash the court action. But this did 
not satisfy the insatiable Fugger. In May, 1525, the Emperor 



Charles V issued a decree, prepared for him largely by Fugger’s 
imperial lobbyists, declaring that hereafter ore contracts granting 
monopoly rights to merchants would not be considered monopo- 
listic and that such merchants might sell their ores to one buyer, 
under monopolistic agreements, without violating the Reichstag 
decrees. Even this did not quiet the imperious Jacob. He did not 
rest until, five months later, the Emperor issued another decree 
declaring that his two copper contracts in 1515 and 1520 did not 
involve “criminal enhancement of prices.” 

But despite these strenuous stratagems to defend the structure 
of wealth he had reared, the clouds were gathering over the relent- 
less monopolist. The flames of religious strife spread over dis- 
tracted Germany from the torch of Luther. The Anabaptists were 
in eruption, the peasants rose, the castles and estates of nobles 
and men of wealth were destroyed. Fugger saw many ancient 
families forsaking the old Church for the standard of Luther, who 
lost no opportunity to denounce him and his “cutpurses.” And as 
he sat in his splendid palace scheming to escape further damage 
and humiliations from the antimonopoly crusaders, the gravest 
news came from Hungary. That unhappy and backward country 
lay under the shadow of the Turk, for Sultan Suleiman had already 
captured one of the fortresses of Belgrade and merely awaited a 
favorable surcease from some of his other warlike enterprises to 
swoop down upon the land where Jacob had built his great in- 
dustrial edifice. 

But Hungary itself was in a state of political confusion while its 
people wallowed in the most degrading poverty. Vladislav, Fugger’s 
royal friend, had died, leaving a boy of ten on the throne and a 
flock of courtiers and politicians struggling for control. A powerful 
nationalist movement sprang up. The half-starving peasants united 
with the small nobles to rise against the “foreign” capitalists who 
were exploiting their land and draining away its resources. 

In the midst of these disorders Alexis Thurzo, who succeeded 
his father Johann as factor of the Fugger-Thurzo Company in 
Hungary, became treasurer of Hungary. The king was loaded with 



debts partly growing out of the indemnities or “reparations” pay- 
ments of the treaty of Pressburg and others of his own making, a 
good deal of which was due to the Fugger firm. The country itself 
groaned under a crushing debt. Thurzo brought about a devalua- 
tion of the currency. It did not affect Fugger’s credits since they 
were payable in gold, but it did enhance in Hungary the value of 
his copper holdings. In any case, a storm of indignation against 
Fugger swept over Hungary which, added to the general hatred of 
the foreign concessionary, brought the mobs swarming to the Ofen 
and Neusohl plants of the company, which were sacked and looted 
with immense losses. The young King Louis summoned Thurzo 
and forced him to sign an agreement canceling the royal debts to 
Fugger, renouncing all claims for damages to the Fugger-Thurzo 
plants, and agreeing to furnish to the king 200,000 Rhenish golden 

When the news of these disasters reached Fugger at his desk in 
Augsburg it filled him with wrath. He lost no time in the pursuit 
of vengeance and restoration. He did precisely what the American 
or British oil concessionary does in Mexico when the government 
seizes an oil well. He appealed directly to the Emperor, Charles V, 
who was then in Spain. The Emperor promptly notified the Hun- 
garian king that he would support the claims of Fugger to the 
uttermost. Menaced by the Turk on one frontier and the outraged 
monopolist on the other, Louis yielded. But the masterful merchant 
prince and banker was at the end of his labors. Worn out by all 
his ceaseless adventures in pursuit of wealth upon so many fronts, 
before the Hungarian business could be repaired, Jacob Fugger 
lay dying in his Augsburg palace. The Archduke Ferdinand, who 
represented the Emperor during his absence, proceeding to the 
opening of the Diet at Augsburg with his train of courtiers and 
guards, ordered the drums and trumpets silenced as the royal pro- 
cession passed the house of the dying merchant. 

Fugger breathed his last December 30, 1525. The next year 
Suleiman with his Turks swept down upon Hungary, annihilated 
its small army, devastated a fourth of the country, and departed, 



carrying with him 107,000 captives. But in the one decisive battle 
where Louis’ futile army was destroyed, the King himself was 
killed. The Hungarian monarch died without a son, and under the 
treaty of Pressburg, the crown of Saint Stephen fell into the lap 
of the Hapsburgs. In 1526 Archduke Ferdinand was elected King 
of Hungary. The Fugger dynasty, now ruled over by Anton 
Fugger, Jacob’s nephew, came into complete possession of the 
Fugger-Thurzo interests and once again into complete domination 
of the Hungarian copper resources. 

Fugger was buried in the beautiful chapel that, like a Pharaoh, 
he had begun to build fifteen years before. How differently these 
two men — Maximilian and Fugger, his banker and counselor — 
looked upon their deaths and monuments! Maximilian, feeling 
within him the signals of age and dissolution, had for four years 
carried around with him wherever he went a stout oaken coffin. 
Before his death at Innsbruck he left minute directions for his 
burial. He ordered that his hair be cut off, all his teeth extracted, 
pounded to powder, and publicly burned in the chapel of his palace. 
He ordered his corpse to be exposed to the people as a royal in- 
stance of mortality. He commanded that his body, put into a sack 
of lime swathed in silk, should be put into the oaken coffin and 
buried under the altar of his chapel so that the priest, daily saying 
his Mass, would humiliate the mortal remains by walking over the 
head and heart. 

But the proud merchant of Augsburg provided for himself a 
magnificent mortuary chapel gleaming in marble and color and 
gold, decorated by artist and sculptor, and bearing the epitaph for 
which Fugger had provided both the text and the artist before his 
death, amazing in its brazen egoism: 

TO GOD, ALL-POWERFUL AND GOOD! Jacob Fugger, of Augs- 
burg, ornament to his class and to his country, Imperial Councilor under 
M aximilia n I and Charles V, second to none in the acquisition of ex- 
traordinary wealth, in liberality, in purity of life, and in greatness of 
soul, as he was comparable to none in life, so after death is not to be 
numbered among the mortal. 

Historical Pictures 

John Law 


John Law 



John Law, the goldsmith’s son, was born in Edinburgh, Scotland, 
in April, 1671. Having escaped from prison in London, where he 
was held after conviction of murder in his early twenties, he toured 
Europe, earning his living as a professional gambler, and then 
achieved the most amazing leap in history. He bounded in one 
immense flight from the gaming table to the highest office in France 
— a country of which he was not a citizen and from which, a few 
years before, he had been ejected by the minister of police because 
of his suspiciously consistent winnings. He had operated a gam- 
ing table in the house of a notorious actress and courtesan. And 
when he assumed the role of financial dictator of France he had 
the satisfaction of succeeding the very gentleman who as minister 
of police had invited him to clear out of Paris. 

Law discovered and perfected the device that has played, per- 
haps, the most important role in the growth of what we now call 
finance capitalism. Here is what he discovered. 

On the first day of January, 1939, the banks in America had on 
deposit, guaranteed by the government, the money of their de- 
positors to the extent of fifty billion dollars. But the balance sheets 
of these banks showed only seventeen billion dollars in cash. A 
closer examination, however, reveals that not only was the fifty 
billions in deposits a myth, but the seventeen billions in cash was 
equally a fiction. There is not that much cash in America. The 
actual amount of cash — currency — in the banks was less than a 
billion dollars. 




John Law did not invent the device that makes this miracle 
possible. But he discovered its uses and gave it to the world. Ex- 
perimenting with it, he climbed one of the most dazzling peaks of 
material success, accumulated a vast fortune, engineered one of 
the dizziest adventures in the history of national finance, and 
ended by dying in poverty in Venice. 

His father was a goldsmith. The goldsmith was the tadpole 
whence the modern banker sprang. He made a moderate fortune 
lending money at usurious rates. Thus the boy’s first years were 
spent in the home of a moneylender and a Scot. He was educated 
with the greatest care with particular attention to mathematics. 
When he was twenty he left Edinburgh for London to taste the 
pleasures of the wicked capital of William and Mary. 

He got access to the smartest circles. He was a young man of 
education and culture, handsome, quick-witted, a good athlete 
excelling at tennis, a graceful dancer, and a redoubtable talker. 
He spent his mornings in the city, where he got a reputation for 
skill in speculating in government paper. He passed his afternoons 
in the parks, his evenings at the opera or theater, and the later 
hours at the routs, balls, masquerades, and gaming houses. He 
played for high stakes and won large sums. He was a man with a 
system. Had he lived in our time he would have been in Wall Street 
with an infallible formula for beating the market. 

The end of this was a duel which cut short his career in England. 
He got into a quarrel with an aging dandy known as Beau Wilson. 
Whatever the cause, which remains obscure, the two gentlemen 
met in Bloomsbury Square, April 9, 1694. It was not a noble per- 
formance. Apparently there was but a single pass when Mr. Law 
put his blade an inch or two into the breastbone of the ancient 
coxcomb, who died on the spot. Law was thrown into the Old 
Bailey, tried, convicted of murder, and sentenced to death. But 
presently he was let out somehow, until, on the demand of the 
victim’s relatives, he was recommitted to jail. But very quickly he 
escaped from prison, was rowed down the Thames to a waiting 
vessel aboard which, as fate would have it, he made his way to 



Amsterdam. A reward of fifty pounds was posted for his capture. 
But probably the headsman did not hanker too hungrily for his 
head, the law against dueling having been sufficiently vindicated 
by his conviction. This was in 1694. 

In Amsterdam he established some sort of connection with the 
British resident there. And thus he found the opportunity to ob- 
serve the working of the famous Bank of Amsterdam. Here the 
modern bank was being hatched. This historic institution was 
playing a decisive role in modeling the system of finance capitalism 
that attained its full flower in our time. Law liked money as an 
instrument of power. But he was deeply interested in it also as a 
social mechanism. He pondered its uses, its vagaries, and, above 
all, its limited quantities. 

He was more than gambler. He was a fabricator of theories. 
By 1 700 — when he was twenty-nine — he was back in Scotland with 
a plan for rescuing her foundering economy. He printed a book — 
Proposals and Reasons for Constituting a Council of Trade in 
Scotland. He pressed it upon his countrymen, who rejected it. 
Whereupon he went back to the Continent, where for fourteen 
years he drifted around Europe amassing a fortune at roulette and 
cards and weaving his expanding financial theory for every public 
man whose ear he could reach. This theory was that the economic 
system of that day was being starved because of insufficient sup- 
plies of money. And, using the Bank of Amsterdam as a model, he 
had a scheme for producing all the money a nation needed. He 
was accompanied by his wife and his young son and daughter. 
Like that fabulous Don Louis, the Marques de Vincitata, in 
Anthony Adverse, the restless gambler traveled about in an elab- 
orate coach. For the greater part of fourteen years this unwearied 
coach rumbled all over the trade routes of Europe, from metropolis 
to metropolis, wherever people of wealth and fashion could be 
found in clusters seeking pleasure and profit at the gaming table. 
Everywhere he mingled with the most important and the noblest 
persons. He played with ministers of state, won their silver, and 
lectured them upon the virtues of his economic theories. 



In 1705 he was back in Scotland with another book and another 
plan for saving his unwilling countrymen. But, despite the support 
of such powerful persons as the Duke of Argyle, they would have 
none of it. By 1 708 he was in Paris. There he made a great stir. 
He had a large capital. Everywhere he won. He became a sort of 
legendary figure at all the fashionable salons — in the Rue Dau- 
phine, at the H6tel de Greve, in the Rue des Poulies. He set up a 
table for faro at the salon of Madame Duclos, variously described 
as famous comic actress and courtesan. The rich and noble game- 
sters of Louis XIV’s Paris thronged to this salon. He struck up a 
friendship with the Due d’Orleans. The Duke presented him to 
Desmarets, Minister of Finance, who listened with enchantment 
to Law’s project for recasting the financial system of France. 
Desmarets took the scheme to Louix XIV who rejected it out of 
hand. 1 

Law made his appearance at the gambling salons in the evenings 
with two large bags of specie. He played for such high stakes that 
the existing coins became burdensome, so he had cast a large coin 
of his own mintage to facilitate the handling of the stakes. People 
marveled at his invariable luck. It was not luck, he said. He had 
a system. It was mathematics. Others whispered, as was inevitable, 
that it was something more than either luck or mathematics. The 
Chief of Police, M. d’Argenson, took notice of the audacious and 
dashing stranger. He told M. Law that he would do well to quit 
Paris. But it is only fair to say of him that he has the testimony 
of the perspicacious Due de Saint-Simon, one of his critics, that 
he was not a trickster. 

The coach again took up its ceaseless wanderings, to Germany, 
to Genoa, to Florence, to Venice, to Rome. At Genoa Law was 
again requested to move on. His fortune was growing. He was a 
millionaire. Stories clustered about his name throughout Europe. 
At Turin he was presented to Victor Amadeus, King of Sardinia. 
Law buzzed his system into the sovereign’s ear. But the wily Italian 

1 Louis is said to have rejected the plan because Law was not a Catholic. This is 
hardly credible since Samuel Bernard, Louis’ chief financial agent, was a Huguenot. 



told him he should go to France. France had need of a financial 
miracle worker. Old Louis XIV was coming to the end of his reign. 
And Law was watching that port again. When Louis XIV died Law 
hurried to Paris and in an amazingly short time gained the con- 
fidence of the Regent, his acquaintance, the Due d’Orleans, and 
set in motion, with the freest hand, all his theories which resulted 
in what Law and the French then called the System and what 
history has dubbed the Mississippi Bubble. 

It did not last long, but in its course Law rose to the highest 
powers in France. Throughout, the roving gambler kept his head 
with singular poise and dignity, as one born to rule. He literally 
exercised all the powers of government. He was surrounded by 
flatterers. Expensive equipages jammed his roadway. His anteroom 
was filled with the rich and the noble begging for an audience. His 
son was admitted to dine with the young King Louis XV. His 
daughter gave a ball, and the most exalted nobles intrigued for a 
bid, some for her hand. 

He was, of course, a Protestant, but in order to become Comp- 
troller General of France, he embraced the Catholic religion. He 
was invariably courteous, affable, good-humored, profoundly con- 
vinced of his theories. And at one time, indeed, he saw about him 
in France such an upsurge of confidence, so many evidences of a 
rising boom, that he was justified in his illusion. Indeed one British 
nobleman told the French that Louis XIV had not been able to 
take away from France as much as Law could restore. 

Law accumulated a vast fortune, but he invested it entirely in 
the securities of his companies and in a string of splendid estates 
in France. 

His public career was brief. He opened his bank in 1716. He 
was driven from France amid the execrations of the people in 
1720. He entered France worth 1,600,000 livres made chiefly at 
cards. He left it empty-handed after the crash of the greatest 
gamble in history — in which, as Voltaire said, a single unknown 
foreigner had gambled against a whole nation. 

This was the man who reached a degree of power under Louis 



XV which had not been held by any man since the days of 


Law’s famous Mississippi Bubble was something more than a 
mere get-rich-quick scheme. To understand it you must have a 
clear idea of the theory which lay at its base. 

This theory consisted in two propositions. One was that the 
world had insufficient supplies of metal money to do business with. 
The other was that, by means of a bank of discount, a nation 
could create all the money it required, without depending on the 
inadequate metallic resources of the world. The bank Law had in 
mind was nothing more or less than the kind of banks we now do 
business with universally. But this was a unique proposal then. 

Law did not invent this idea. He found the germs of it in a bank 
then in existence — the Bank of Amsterdam. This Law got the 
opportunity to observe when he was a fugitive from England. 

The Bank of Amsterdam, established in 1609, was owned by 
the city. Amsterdam was the great port of the world. In its marts 
circulated the coins of innumerable states and cities. Every nation, 
many princes and lords, many trading cities minted their own 
coins. The merchant who sold a shipment of wool might get in 
payment a bag full of guilders, drachmas, gulden, marks, ducats, 
livres, pistoles, ducatoons, piscatoons, and a miscellany of coins 
he had never heard of. This is what made the business of the 
moneychanger so essential. Every moneychanger carried a manual 
kept up to date listing all these coins. The manual contained the 
names and valuations of 500 gold coins and 340 silver ones minted 
all over Europe. 

No man could know the value of these coins, for they were 
being devalued continually by princes and clipped by merchants. 
To remedy this situation the Bank of Amsterdam was established. 

Here is how it worked. A merchant could bring his money to 
the bank. The bank would weigh and assay all the coins and give 



him a credit on its books for the honest value in guilders. There- 
after that deposit remained steadfast in value. It was in fact a 
deposit. Checks were not in use. But it was treated as a loan by 
the bank with the coins as security. The bank loaned the merchant 
what it called bank credit. Thereafter if he wished to pay a bill he 
could transfer to his creditor a part of his bank credit. The creditor 
preferred this to money. He would rather have a payment in a 
medium the value of which was fixed and guaranteed than in a 
hatful of suspicious, fluctuating coins from a score of countries. 
So much was this true that a man who was willing to sell an article 
for a hundred guilders would take a hundred in bank credit but 
demand a hundred and five in cash. 

One effect of this was that once coin or bullion went into this 
bank it tended to remain there. All merchants, even foreigners, 
kept their cash there. When one merchant paid another, the trans- 
action was effected by transfer on the books of the bank and the 
metal remained in its vaults. Why should a merchant withdraw 
cash when the cash would buy for him only 95 per cent of what 
he could purchase with the bank credit? And so in time most of 
the metal of Europe tended to flow into this bank. 

It was what Professor Irving Fisher now demands for America— 
a one hundred per cent bank. For every guilder of bank credit or 
deposits there was a guilder of metal money in the vaults. In 1672 
when the armies of Louis XIV approached Amsterdam and the 
terrified merchants ran to the bank for their funds, the bank was 
able to honor every demand. This established its reputation upon a 
high plane. The bank was not supposed to make loans. It was 
supported by the fees it charged for receiving deposits, ware- 
housing the cash, and making transfers. 

There was in Amsterdam another corporation — the East India 
Company. A great trading corporation, it was considered of vital 
importance to the city’s business. The city owned half its stock. 
The time came when the East India Company needed money to 
build ships. In the bank lay that great pool of cash. The trading 
company’s managers itched to get hold of some of it. The mayor, 



who named the bank commissioners, put pressure on them to make 
loans to the company — loans without any deposit of money or 
bullion. It was done in absolute secrecy. It was against the law 
of the bank. But the bank was powerless to resist. 

The bank and the company did this surreptitiously. They did 
not realize the nature of the powerful instrument they had forged. 
They did not realize they were laying the foundations of modern 
finance capitalism. It was Law who saw this. Law perceived with 
clarity that this bank, in its secret violation of its charter, had 
actually invented a method of creating money. He came to the 
conclusion that this was something which should be not merely 
legalized, but put into general use to cure the ills of Europe. He 
also saw clearly that this bank had brought into existence a great 
pool or reservoir of money and that he who controlled this supply 
could perform wonders. This was to be one of the most powerful 
weapons of the acquisitive man of the future — the collection of 
vast stores of other people’s money into pools and the capture of 
control of those pools. 

Here is what Law saw. It is an operation that takes place in our 
own banks daily. The First National Bank of Middletown has on 
deposit a million dollars. Mr. Smith walks into the bank and asks 
for a loan of $10,000. The bank makes the loan. But it does not 
give him ten thousand in cash. Instead the cashier writes in his 
deposit book a record of a deposit of $10,000. Mr. Smith has not 
deposited ten thousand. The bank has loaned him a deposit. The 
cashier also writes upon the bank’s books the record of this deposit 
of Mr. Smith. When Mr. Smith walks out of the bank he has a 
deposit of ten thousand that he did not have when he entered. The 
bank has deposits of a million dollars when Mr. Smith enters. 
When he leaves it has deposits of a million and ten thousand 
dollars. Its deposits have been increased ten thousand dollars by 
the mere act of making a loan to Mr. Smith. Mr. Smith uses this 
deposit as money. It is bank money. 

That is why we have today in the United States about a billion 



dollars in actual currency in the banks but fifty billion in deposits 
or bank money. This bank money has been created not by de- 
positing cash but by loans by the bank to depositors. This is what 
the Bank of Amsterdam did by its secret loans to the East India 
Company, which it hoped would never be found out. This is what 
Law saw, but more important, he saw the social uses of it. It 
became the foundation of his System. 


Law had in him that restless demon that drives those possessed 
to shape the world to their heart’s desire. Gambler, lover of leisure 
and of easy money, he was yet a reformer. He looked upon a prob- 
lem that has baffled men ever since the Middle Ages. When things 
go to pot the merchant finds he cannot sell his goods because there 
is not enough money in the hands of his customers. The remedy for 
this, he thinks, is more money. And how to produce more money has 
fascinated the minds of amateur economists for centuries as depres- 
sion has followed depression. Always there comes forward a savior 
with a plan to produce more money purchasing power. It has never 
failed from Law to Major Douglas. They never fail to collect a 
vast train of loyal followers. Their remedy has always this supreme 
virtue: it is easy. It was Dr. Townsend’s evil genius that prompted 
him to propose a scheme for raising all the old people to prosperity 
with pensions but planned to raise the pension money by the hard 
way of taxes. 

Law made his first appearance as a reformer in Edinburgh in 
1700. Scotland was in a severe depression. He came forward with 
an outright proposal for national planning. He urged a Council of 
Trade made up of three nobles, three barons, three commoners, 
three representatives of the Indian and African companies, and a 
neutral chairman — thirteen in all. 

He then proposed a national fund for spending to be raised by 
taxes of about two and a half per cent on all manufactures, lands, 



rents, inheritances, and clerical benefices and ten per cent on all 
wheat and agricultural products. An additional million pounds 
might be borrowed in anticipation of these revenues. 

Of this sum 400,000 pounds would be employed to promote the 
trade of the Indian and African companies and the balance would 
be used for various relief and recovery projects — public works, 
pegging farm and manufactured-goods prices, to lend and con- 
tribute to corporations and to fisheries, to encourage manufac- 
tures, and to make charitable payments to people in distress. 
There were to be import duties. Monopolies were to be regulated. 
There was to be free coinage of gold and silver at a fixed ratio and 
fixed standards of weight at His Majesty’s mints. 

This will have a familiar sound to those familiar with economic 
history and the devices of mercantilism and of Colbertism as well 
as to those who will see here the prototypes of the various alpha- 
betical agencies of the New Deal. But as yet Law had not got 
around to producing the money by bank issues. Unlike the New 
Deal, he proposed paying the bills out of taxes. 

This plan the Scottish government rejected. Law had put it 
into a book bearing one of those wordy eighteenth-century titles — 
Proposals and Reasons for Constituting a Council of Trade in 
Scotland. Such books published today bear such cryptic titles as 
$2500 a Year for All, The Way Out, Every Man a King. 

The money theories are missing from this first plan for the 
rehabilitation of Scotland. It must have been after this that Law 
began to have a clear idea of the system he later sold to the Regent 
of France. Those theories he finally put into a book he published 
in Scotland in 1705, which is his principal contribution to the 
literature of economics. It was called Money and Trade Consid- 
ered, with a Proposal for Supplying the Nation with Money. 

After a brief examination of the nature of metallic money, Law 
in this volume lays down the proposition that the increase of money 
makes increase of trade and that an excess of exports over imports 
results in a large supply of money for production. As trade depends 
on money so the increase or decrease of a people depends on money. 



Scotland has little trade because she has little money. This was 
good mercantilist doctrine. 

There can be no doubt that the new capitalist money economy 
was greatly handicapped by a lack of sufficient supplies of money. 
There was no money but coins. We may see in this country how 
greatly handicapped our commercial activity would be if we had 
nothing above the metallic money which circulates. This is never 
above six billion, while our banks have fifty billion in deposits. 

Law argued that all sorts of measures had been used to increase 
money but none had succeeded. Banks, he said, were the best 
instruments for accomplishing this. He then referred specifically to 
the Bank of Amsterdam and proposed that his bank do generally 
what the Bank of Amsterdam did only secretly for a single com- 
pany — make loans in excess of its cash deposits. He proposed also 
that the bank should be permitted to issue notes in excess of its 
cash deposits. He noted that “some are against all banks where 
the money does not lie pledged equal to the credit.” But he reminds 
the reader that “if 15,000 pounds is supposed to be the money in 
the bank and 75,000 pounds of notes are out, 60,000 pounds is 
added to the money of the nation, without interest.” 

Law was arguing in substance for the thing that is now common 
practice in our banking system and that, indeed, is one of the 
cornerstones of modern capitalism. 

He then propounded his theory that the basis of paper money 
should be land rather than gold and silver. Silver was defective 
because the quantity is destined to increase. But land is of limited 
volume and is therefore destined to increase continuously in value; 
as a base for money it would ever become sounder. 

Along with all this he revived his proposal for a commission for 
Scotland. Among other things this commission would have power 
to coin notes by lending on ordinary land values up to half or two 
thirds of the value of the land. Thus he would flood Scotland with 
new money. And for this system he obtained the support of the 
Duke of Argyle, the Marquess of Tweeddale, and other powerful 



noblemen and of a strong court party known as the Squadrone. 
But the Scottish parliament rejected it, saying in its resolution 
“that to establish any kind of paper credit, so as to oblige it to 
pass, was an improper expedient for the nation.” Another reason 
given was that the plan might reduce all the estates in the kingdom 
to dependence on the government, which would become the uni- 
versal creditor. But with this new edition of his plan of salvation 
for Scotland, Law had come around to be the New Dealer of his 

With this brief outline of Law’s theories we are now prepared 
to see how he sold them to France and, in a brief time, set France 
upon one of the most amazing financial adventures in history, gave 
to her the first great financial panic of the modern banking system, 
and, during the life of the episode, became almost the dictator of 
that country. 


Louis XIV set the stage for John Law. The unscrupulous and 
spendthrift monarch made way for the evangelist of easy abun- 
dance. It was necessary that France should be ruined before she 
would turn to so fantastic a redeemer. Louis XIV ruined her. 

No man has been dealt with so generously by history as Louis 
XIV. He has been taken at his own estimate with small discount. 
He is recalled as Le Grand Monarque. In truth, he was the worst 
of kings. He used a power that had been put into his youthful 
hands, consecrated by the Church and sanctified by tradition, to 
ravage France. He was a shallow, egotistical, pretentious coxcomb. 
He achieved the effect of grandeur by means that are open to any 
adventurer with the power to squeeze taxes and loans out of a 
compliant people to be expended on projects and wars, displays, 
corrupt servants, and an army of shirt stuffers to produce the 
proper stage effects for what kings call their glory. The power he 
got was an inheritance from his forebears through the genius of 
two corrupt ecclesiastics — Richelieu and Mazarin. The money he 



got through ministers with a talent for inventing ever-new and 
subtle devices for taxing the impoverished people. 

He squandered money with unrestrained abandon. On one palace 
alone — Versailles — he spent 116 million livres. His ministers, 
satellites, and the grafters who waxed rich through his bounties 
and incapacity imitated their betters. These vulgar displays were 
designed to exhibit the monarch and his satellites in the character 
of gods fit to rule the herd. Immense bounties were handed out 
to a swarm of poets and literati to exploit the grandeur and virtues 
of the King. When the King recovered from an illness the odes and 
apostrophes poured out in a flood from the horde of scribblers who 
ate from the King’s bounty. Even the young Racine broke into 
thanksgiving verse. 

The source of all wealth in France was the peasants upon their 
small farms and the artisans in the city. The machine had not yet 
come. Large-scale industry was still unheard of. There could be no 
pretense that the production of wealth at the hands of these humble 
toilers was stimulated and directed by the creative genius of 
inspired entrepreneurs. Hence there were few men of very large 
means who accumulated their wealth through owning and directing 
the processes of production. The wealth of the people, translated 
into money, flowed to the King through oppressive taxes. And 
most of the private fortunes were in the hands of men who knew 
how to tap this stream of public money on its way to the govern- 
ment. The nobles still held their hereditary lands and squeezed 
the last drop of tribute from their tenants. But the business for- 
tunes were accumulated by men who drew them from the public 
revenues through contracts, monopolies, graft, gifts from the sov- 
ereign or from bankers who exploited the public treasury. They 
were strictly parasitic fortunes. 

The peasants lived in mud houses with low roofs and no glass. 
A farmer got a pair of shoes for his wedding, and these had to last 
him a lifetime. But most of them went barefooted. They slept on 
straw, and boiled roots and ferns with a little barley and salt for 
food. Undernourished, they became prey to such diseases as ty- 



phoid and smallpox. Thousands swarmed toward the cities, and 
mendicancy and vagrancy became a scourge. Hospitals had to be 
closed for want of funds. Despite the fact that the people lan- 
guished in hunger and rags, there was overproduction, the curse of 
the capitalist world. In places there was insufficient barley to feed 
the people, but no one could buy even the small supply. Peasants 
who had wine could not sell it to impecunious neighbors and could 
not ship it because they had no horses for transport. 

Out of the meager substance of these wretched people the min- 
isters of the Grand Monarch found the means to wring by taxes 
and loans nearly all the savings of the thrifty and a cruel fraction 
of the earnings of all. Slowly the money income of the nation was 
drawn in an ever-increasing stream toward the throne. But millions 
never reached it. Colbert found that out of 84 millions of taxes 
collected in one year only 32 millions reached the royal treasury. 
The rest found its way into the pockets of the farmers of the 
revenues. What reached the King in taxes and loans provided im- 
mense profits for war contractors and gifts for favorites. Indeed, 
even the virtuous Colbert died worth ten millions, all of which he 
said was derived from royal gifts and the legal prerequisites of 
his office. 

There were extraordinary fortunes in the poverty-stricken 
France of that day. The treasurer of the imperial household was 
accused of appropriating to himself a tenth of the pay of the guard 
for years, and he had 1,600,000 livres invested abroad. Chatelain, 
a groom in a convent, took service with an army contractor, later 
set up for himself, had sixty mounted clerks scouring the country 
for grain for the army, and accumulated a fortune of over ten 
million livres. Crozat rose from a footman to be the greatest mer- 
chant in France, flourishing on government monopolies. Samuel 
Bernard, the great banker, had a fortune exceeding thirty million, 
made in the handling of government finances. Bouret, purveyor 
to the army, is supposed to have got together over 40 millions, 
while the more or less fabulous Brothers Paris de Montmartel 
came to be worth, according to some estimates, as much as a 



hundred million. The Chamber of Justice found six thousand men 
who were by their own estimates worth well over a billion livres, 
a sum equal to about ten billion dollars in our time. 

These parasites, with the gilded coxcomb at their head, had 
drained the nation. In the last fourteen years of Louis’ reign he 
had spent two billion livres more than he had collected in taxes. 
By various devaluations and other devices this had been reduced 
to a debt of 711 million when he died. As his long reign neared its 
end and his prestige declined he felt something must be done to 
revive his glory. This wrong-headed poseur could improvise no 
better stratagem than to stage some dazzling fetes. Fetes cost 
money, however, and the treasury was empty. But Desmarets, the 
Comptroller, was ordered to find money. A twist of fate saved him. 
He discovered two of his servants inspecting his papers and com- 
municating the details secretly to certain important stock jobbers. 
Desmarets planned an issue of thirty million livres. He put this 
paper in the hands of Samuel Bernard to sell. He purposely left 
upon his desk the secret outline of a royal lottery to pay the issue of 
securities. This was promptly communicated to the speculators. 
When Bernard offered his shares the jobbers bid up the price. When 
all had been disposed of and the lottery failed to materialize, the 
securities fell to a low level. Louis XIV’s government was driven to 
this shabby and fraudulent fund-raising expedient to put on a great 
spectacle to exhibit to the desperate people of France the splendor 
of the aging and obscene sovereign. 

He died on September 1, 17x5, leaving the country he had 
raided in a state of appalling want and the treasury bankrupt. 
When the news of his death reached the roving Scottish gambler, 
he lost no time packing his family and his baggage into his much- 
traveled coach. He directed the postilion to head for Paris. 


About the middle of September, 1715 — about two weeks after 
Louis XIV died — the Due d’Orleans, Regent of the child Louis 



XV, sat with his newly formed cabinet. They were grave-faced and 
bewildered. A proposal had been made that the Regent should 
declare the nation bankrupt. France was indeed in ruins. The 
treasury was empty. The army was unpaid. The expenses of the 
government for the preceding year came to 148 million livres. 
The receipts were trivial. Besides, 740 million livres in obligations 
would fall due in the year. So high-minded and wise a man as the 
Due de Saint-Simon had urged a proclamation of bankruptcy. 
Industry and trade had almost ceased to function. France had 
come to the end of a road, as America did in 1933, save that she 
was impoverished in substance as well as in the collapse of her 
economic mechanisms. But the Regent rejected the shame of a 
public confession of bankruptcy. Instead he sought to accomplish 
the same end by a less frank device. 

Upon the death of Louis XIV all the directions of his will were 
rejected and Philippe, Due d’Orleans, virtually took possession of 
the government as Regent of the boy king. This act completed the 
series of events that it was necessary for fate to weave for the 
appearance of Law. She had created for him a ruined nation. Now 
she marched upon the scene a ruler who would open the door for 
the promiser of good things. 

Orleans was one of those nimble persons who liked the surface 
of ideas. He was a dabbler. He posed as a painter, an engraver, a 
musician, a mechanician. He composed an opera that was played 
before the King. He tinkered with chemistry. But he loved to play 
with ideas, was known to have an open mind — open at both ends — 
a dilettante’s interest in the masses, and an unfailing talent for 
making bad choices of servants. 

At such a moment, when the one obvious and desperate need of 
the government was money, John Law appeared like an angel from 
heaven. In a disordered world in which every statesman was at 
sea, he alone had a plan. And it was a plan which called, not for 
sacrifice or for painful surgery, but for a pleasant journey along 
the glory road to riches. As Law himself said, it was a perfect 
dispensation in which the king, instead of being an omnivorous 



taxer and an insatiable borrower of the people’s substance, was to 
become the dispenser and lender of money. Here was to be a New 
Deal — the first New Deal of the capitalist order. 

Moreover, Law had access to Orleans. The Regent had taken 
a fancy to him years before. Law’s plan had become greatly ex- 
panded under the productive influence of innumerable conversa- 
tions. He was a facile talker and a superb salesman. And he com- 
pletely sold the Regent. His plan for a royal bank was submitted 
to the Council on October 24, only about seven weeks after Orleans 
assumed power. But a majority of the Council opposed it. He 
persisted. He declared that, if permitted, he would establish a 
private bank and finance it himself if he was authorized by a royal 
patent to establish it — the Banque Generale. And on May 2, 1716, 
the royal patent was granted and the Banque Generale was estab- 
lished privately and financed largely by Law himself. 

It began on a small scale. But it was an entering wedge. It was 
such a bank as we now have on almost every corner of the business 
districts of small American towns. It was to receive deposits and 
discount bills and notes; it could make loans and issue its own 
notes. Law and his brother William set up the bank in Law’s 
house. The company issued 1200 shares of 5000 livres each. The 
subscribers were to pay for the shares in four installments — one 
fourth in cash and three fourths in billets d’etat. This was a master 
stroke. It invented a use for the billets d’itat, or government 
securities, which were worth no more than twenty or thirty livres 
on the hundred. The amount of cash thus brought in was small, so 
that the bank was scarcely larger than the First National in any 
little American town. It did not seem formidable and this dimin- 
ished opposition. It gave Law the chance to experiment with his 
idea. The Regent let it be known that he was its patron and that 
he would be gratified if merchants would open accounts with M. 

This institution had an almost instantaneous success. The 
value of a depository was great. The advantage of introducing 
certainty into the value of bank money, as in the Bank of Amster- 



dam, encouraged all merchants to bring their metal money there. 
It was not long before M. Law’s bank money was quoted at a 
premium over cash. The bank discounted bills at six per cent 
instead of the extortionate rates, as high as thirty, which the 
usurers charged. Furthermore, the bank guaranteed always to 
deliver in exchange of its own credit or its notes the same amount 
of silver as was deposited. And in a country living continuously 
under the fear of inflation this was a great inducement. The de- 
posits rose enormously. Law was able to reduce the interest rate 
to four per cent. His reputation rose. He was no longer looked upon 
as an adventurer. His influence with the Regent grew. His bank 
notes were circulating around France, the best money in the 

A year after the bank was founded (April io, 1717) the 
Council of State ordered all agents of the royal revenues to receive 
the bank’s notes in payment of all government dues and to cash at 
sight its notes to the extent of their available funds. Every govern- 
ment office became a sort of branch of the bank. The Parliament of 
Paris ordered the revocation of this decree, for Law had active 
enemies. But the Regent compelled the Parliament to annul its 
order. Law by this time had become the greatest figure at court. 

While things went thus well for Law, they went badly for the 
government. When, after his accession to power, the Regent re- 
jected the proposal for national bankruptcy, he employed an an- 
cient stratagem to achieve the same result. He devalued the livre, 
coining 1,000,000,000 livres into 1,200,000,000. He called in the 
682 million livres in billets d’etat and issued in their place 250 
million at reduced interest — four per cent. But this helped only a 
little. The government’s paper was worth 20 per cent of par before 
this drastic operation and the new securities were still worth only 
20 per cent. 

The next move of the government was drastic in the extreme. 
The Due de Noailles, Comptroller General, ordered every person 
who had made a profit out of state offices or contracts during the 
preceding twenty-seven years to make an exact accounting. A 



Chamber of Justice was set up. Rewards were offered to informers. 
And for more than a year some 6000 persons — farmers of the 
revenues, high officers, government contractors — were dragged 
before the Chamber of Justice. These constituted the richest and 
most powerful men in the kingdom. 

Wealth became a crime. People of wealth were in panic. They 
hid their money. They attempted to flee. They tried bribing judges 
— and some succeeded. But the spoliation of the rich and corrupt 
parasites who had robbed the state for a generation went forward 
ruthlessly. Burey de Vieux-Cours, president of the Grand Council, 
admitted possessing 3,600,000 livres. He was fined 3,200,000. All 
the rich bankers were heavily taxed — all save the Brothers Paris 
de Montmartel, who actually were made inspectors of the visa. 
Of the six thousand persons examined, some 4110 were condemned. 
They confessed to having 713 millions and were fined 2x9 millions. 
Perhaps half the fines were collected. This ferocious invasion of 
the rich was carried on not by a revolutionary government of 
radicals but by the royal government of Louis XV. 

But all this aided the staggering administration only slightly. 
In May, 1718, after two years of futile, even savage expedients, the 
livre was devalued again. This time it was cut 40 per cent, amid 
the opposition of parliaments and to the accompaniment of riot 
and bloodshed all over France. In the last sixteen years France 
had witnessed forty-two changes in the price of gold and silver 
and over 294 in the preceding four centuries. The silver in the livre 
had been cut from twelve ounces to less than half an ounce. The 
people of France, by successive devaluations, had been robbed by 
the government of over seventy times the amount of money in cir- 
culation in the country. 

In the midst of the disasters, Law’s reputation alone seemed to 
rise as his bank established its utility. And this, combined with the 
desperate state of French finances, brought on the moment for 
carrying into execution the grand scheme he had been meditating 
— the scheme which was destined to be known as the System. 




Here we enter, almost for the first time in history, the compli- 
cated labyrinth of modern finance. But it can be made quite simple 
and clear if we will discard the personal and historic incidents that 
clutter it up. 

It will be remembered that Law had set up his bank with a sub- 
scription of six million livres — three fourths payable in billets 
d’etat worth only about 20 or 30 livres in the hundred. The bank 
succeeded, the deposits grew, and Law paid dividends. Subscribers 
were delighted. Their all but worthless billets d’dtat were trans- 
muted into profit-making shares. 

His second venture was into trade. Crozat, a sort of eighteenth- 
century Cecil Rhodes, had enjoyed a monopoly of colonization and 
trade with Louisiana and Canada, France’s possessions in North 
America. He had made a great fortune as a merchant and govern- 
ment contractor but did not do so well with the French East India 
Company, through which he operated his monopoly in the New 
World. Law, through the Regent’s favor, took over this enterprise. 
He formed a new corporation — the Company of the West. He 
issued 200,000 shares at 500 livres each — 100 million livres. But 
he used the scheme which had worked so well with the bank. He 
accepted payment for the shares in billets d’etat. These billets 
d’etat the Regent converted into government rentes at four per cent. 
The company was thus insured of an income of four million livres a 
year. This was in August, 1717. 

Then in 1718 the company got the farm of the tobacco monopoly 
from Law’s friend, the Regent, for which the Company of the 
West paid 2,020,000 livres. This was expected to produce a yearly 
profit of four million livres. This, with the four million in interest 
from the government, would mean an income for the company of 
eight million. But the company was also selling “lots” — for the 
Mississippi Company, as the Company of the West was called, 
was a great real-estate development scheme. Lots a league square 



were offered at 30,000 livres, and some persons invested as high as 

600.000 livres. This added to the income, though it went quite 
slowly at first. 

Then by the end of 1718 and the beginning of 1719, the com- 
pany took over three similar companies — the Senegal Company, 
the China Company, and the East India Company, with the same 
kind of trading privileges as the Louisiana Company in different 
parts of the world. Law then organized a new corporation — the 
Compagnie des Indes (the India Company) — which took over all 
of these adventures, including the Mississippi Company and the 
tobacco monopoly. It became the master holding company. The 
new company issued 50,000 new shares at 550 livres each, netting 

27.500.000 livres. The original shares of the Company of the West 
were called mothers. These were called daughters. 

We must not make the common mistake, however, of supposing 
that what was called the Mississippi Bubble of Mr. Law was just 
a real-estate development. It was indeed the smallest part of the 
whole episode. It was called the Mississippi Bubble because the 
company that carried on all the enterprises was popularly known 
as the Mississippi Company and those who bought its shares were 
called Mississippians. It got its name from the great river which 
ran through its principal domain, though the company was never 
legally called the Mississippi Company. The real basis of the 
mania of speculation that we are now to see lay in wholly different 
fields. At this point John Law, the gambler of three years before, 
had become the autocratic master of a vast domain extending from 
Guinea to the Japanese Archipelago, Cape of Good Hope, East 
Coast of Africa washed by the Red Sea, the islands of the Pacific, 
Persia, the Mongol empire, Louisiana, and Canada. And he pro- 
ceeded by all sorts of extravagant promotional and advertising 
methods to push the sale of lands and the colonization of parts of 
this empire. 

About the same time — December 4, 1718 — the Banque Generale 
was transformed into the Royal Bank. That is, the state took it 
over. The stockholders who had paid for their shares one fourth 



in cash and three fourths in almost worthless billets d’etat sold 
their shares to the government for cash and at par. Thus the man 
who bought a share for 5000 livres — 1500 livres in cash and 3500 
livres in billets d’etat worth only 1000 livres — had actually paid 
no more than 2500 livres for his share. Now he got 5000 livres in 
silver for it, a profit of xoo per cent plus the dividend. But the 
bank was now a royal bank and Law was head of the royal bank 
and the man closest to the Regent. And what is more, the limitation 
in the original charter upon the issue of notes was no longer effec- 

Then came the series of events that startled France. On July 
25, 1719, the India Company took over the royal mint and got the 
privilege of coining money. This was estimated to be worth as 
much as ten million livres a year. It paid fifty million livres for the 
royal privilege and Law put out another 50,000 shares, this time 
at 1000 livres per share, to raise the money. 

On August 25, the company took over the profitable privilege 
of collecting the indirect taxes. Law had enemies within the gov- 
ernment. The most industrious was M. d’Argenson, the former 
police chief who had expelled him from France and was now Comp- 
troller General. Inevitably Law’s success would stimulate others 
to use the same method. D’Argenson conspired with the Brothers 
Paris to organize a corporation to farm the taxes. The Brothers 
Paris were the richest businessmen in France. Sons of a poor 
tavernkeeper of Dauphine, they started transporting provisions 
to the army of the Due de Vendome, rose rapidly, became pur- 
veyors to the army and so powerful and rich that even during the 
ruthless visa of the Due de Noailles they remained untouched. And 
now they formed a corporation issuing 100,000 shares at 1000 
livres each payable in annuity contracts. 

This company bid 48,000,000 livres for the revenues, which it 
got through the influence of d’Argenson. This was called the 
Antisystem. They hoped to collect a vast sum in taxes — perhaps a 
hundred million, paying only 48 million to the king. Law had this 



contract annulled and new bids taken. He outbid the Brothers 
Paris, paying 3,500,000 livres more than they, and got the contract 
for the revenues. D’Argenson resigned. The Brothers Paris were 
now in complete disfavor and retired to one of their estates. A few 
days later Law got the contract for the direct taxes. By this time 
his position was amazing. He had complete possession of the vast 
colonial possessions of France, the monopoly of coining money, the 
collection of the revenues, the tobacco monopoly, the salt 
monopoly. He was, besides, complete master of the finances of 
France as head of the Royal Bank and he was the undisputed 
favorite of the Regent. 

He now began to speak in imperious tones about his plans. He 
would rid the king of France of his debts — the debts that had 
ridden kings for a century. He would make the king independent 
of the parliaments, of the people, of everybody. Instead of making 
the king dependent on the taxpayers and the moneylenders he 
would make the king the giver of all funds and the universal 
creditor. Therefore he announced in September his greatest coup 
— the company would buy up the entire public debt of France. 
The king would have but a single creditor, the company, his 
obedient servant. The outstanding debt was 1,500,000,000 livres. 
Law therefore planned an issue of company stocks of 300,000 
shares. These would be sold at 5000 livres, bringing in the required 
1,500,000,000. Meantime the bank would advance the money. The 
bank had been printing bank notes and issuing them for various 
purposes. It had made loans on stock of the company, had in- 
vested in company stock, had made loans on other projects. Now 
it would issue enough notes to buy up the public debt. Meantime 
the India Company would issue shares and with the proceeds pay 
off the bank loans. 

France’s debt of a billion and a half livres, measured against 
her resources, was hardly less than America’s debt of fifty billion 
dollars today. And Law’s proposal to rid France of her debt by 
buying it through the Mississippi Company is comparable to the 



proposal of Mr. Roosevelt, in our own time, to extinguish the 
public debt of America by purchasing it through the Social Se- 
curity Board. 

In the meantime, by various devices, Law had manipulated the 
market price of company shares until people were offering 5000 
a share for them. So he offered these shares at 5000 livres. But 
hardly had he done this when the shares advanced in price. They 
sold for 10,000. And they were gobbled up in short order. When 
this point was reached at the end of 1719, Law’s company, in addi- 
tion to all its other possessions and powers, was the sole creditoi* 
of the government. 

This marked the peak of the great adventure. Here is how the 
capital of the India Company stood: 








1 st issue 





2nd issue 





3rd issue 





4th issue 








Law had been manipulating the stock prices until the shares 
were selling at 5000. After the rout of the Antisystem and the 
capture of the national revenues they went up to 10,000 livres. If a 
man had bought a share of the Company of the West at 500 livres 
in billets d'etat or 150 livres in money, he would now at 10,000 
livres have a profit of 660 per cent. Before the bubble burst shares 
went to 18,000 livres. This was the financial part of the famous 
System of Law in operation. Now let us see what happened to it. 


In the Paris of that day was a little street called the Rue Quin- 
campoix. It was in fact a small alley, 150 feet long and very 
narrow. It ran at one end into the Rue des Ours; at the other into 



the Rue Aubrey-le-Boucher. Here the bankers had their houses, 
and men who had bills of exchange or billets d’etat or other paper 
to buy or sell went from door to door seeking the best terms. This 
became the center of excitement when, during the visa of the Due 
de Noailles, rich contractors rushed there to divest themselves 
of the evidences of their wealth. It was this little street that became 
the stage for the public scenes and manifestations of the Missis- 
sippi Bubble. It became the symbol of the speculation as Wall 
Street became the symbol of the orgies that flamed up in the 

The other scene of this extraordinary comedy drama was the 
Mazarin Palace. Law purchased this splendid edifice in the Rue 
Vivienne for the headquarters of the company and the bank when 
it was made into the Royal Bank. He added seven other houses 
adjoining. Here Law directed the moves on all the many fronts 
of his System. 

This is what Law was doing. 

First, he was managing a new type of inflation — pumping bank 
funds into the economic system, very much as Mr. Roosevelt is 
doing in America today and with very much the same instrumen- 

Second, he was creating employment by numerous projects of 
public works, as Pericles did in Athens, as Roosevelt, Hitler, Mus- 
solini, and Chamberlain did in 1939. 

Third, he was attempting to stimulate the release and flow of 
hoarded savings back into business. 

Fourth, he was attempting, by exploiting France’s colonial 
empire, to make markets for her products. 

Fifth, he was attempting to relieve the embarrassments of a 
debt-ridden government. 

Sixth, he was making money for himself and his patrons. 

He was engaged in trying to sell shares in the company that held 
France’s colonial empire, and also trying to sell land there to in- 
vestors and speculators. To do this he resorted to the most sensa- 
tional methods of promotion. Indians were brought to France and 



paraded about. Departing emigrants were feted and paraded. 
Finding it difficult to get emigrants, young men were taken from the 
jails and girls from the streets and marched off garlanded to the 
strains of music as if they were honest citizens. Pamphlets, pros- 
pectuses, dodgers were circulated depicting the fabulous riches of 
the new lands. All this helped both shares and lots. 

In the prosecution of the adventure we see many of the devices 
which serve the operators in the markets of today. Rumors were 
set afoot. It was whispered about that diamond mines had been 
found in Arkansas and gold and silver mines in Louisiana, rivaling 
the riches of New Spain and Peru. Stories of the fabulous sums 
being made by speculators and of the important persons who were 
buying shares “leaked” out. 

The preferred list made its appearance. With each issue of 
shares persons of power and influence near to Law and the Regent 
were allowed to subscribe at the issuing price. Thus when the 

300.000 share issue was offered, the Regent got 100,000 shares. 
He subscribed at 5000 livres. He could have sold within two months 
at 10,000 livres. It was by getting shares at the issuing price and 
selling later at the higher prices that many fortunes were made. 

Moreover this served to limit the floating supply of shares in the 
Rue Quincampoix, since the subscribers held their shares off the 
market and thus the market prices were boosted. 

The modern warrant or right came into use. Law himself paid 

40.000 livres for the right to subscribe to a large number of shares 
at par six months later. 

Street loans had their birth. The Royal Bank made loans on 
India Company shares at low rates of interest to stimulate specu- 
lation. When the bubble burst the bank had outstanding 450 
million livres of loans on shares. The bank itself also invested in 
shares. In July, 1719, as Law was maturing the taking over of the 
national debt and the issuance of 300,000 shares, he announced 
that in 1720 the company would pay a 12 per cent dividend. 

Ever since the issuance of the first shares of the Company of the 
West there had been much traffic in them in the Rue Quincampoix. 



These little scraps of paper became the perfect instruments of 
gambling — gambling sanctified by the name of business and 
dressed up as investment. This was better than the counters on 
the tables of the Rue des Poulies or the Hotel de Greve. As the new 
companies came along and the promotion assumed statelier forms, 
the activity in the street increased. 

Almost unnoticed, the inflation that Law had been nourishing 
began to spark. By midsummer of 1719 about 400 million livres 
of bank notes had been issued. An air of enterprise appeared. 
People took confidence. Timid savings came out of hiding. The 
velocity of money increased. Law made extensive loans through 
his bank for enterprises of all sorts. Also he advanced sums for 
huge government projects. 

Barracks were built for the first time to rid the people of the 
burden of housing the soldiers. A canal was built up the Seine, the 
Canal of Burgundy, the Bridge of Blois, new public buildings, 
new hospitals — there was to be a hospital at every six leagues — 
roads, the restoration of neglected farm lands, aids to businessmen 
in debt, and plans for free instruction at the University of Paris 
supported by part of the postal revenues, which brought the youth 
of Paris into the streets parading in gratitude to the great giver 
of all good things — M. Law. Various kinds of nuisance taxes were 
abolished, taxes burdening industry were mitigated or ended. 
Barriers to trade within the nation were struck down. 

Here was a New Deal indeed — the old curse of harrying taxes 
gone, work for the artisans, succor for the farmers instead of levies, 
the spirit of enterprise reborn, the king himself emancipated from 
his creditors, the state become the foster father of all, the fountain 
of blessings rather than the aggrandizer of the people’s substance, 
money flowing out mysteriously and flooding the market place. 
It is not to be wondered that for a few brief months Paris hailed 
the magician who had produced all these rabbits from his hat. 
Crowds followed his carriage. People struggled to get a glimpse 
of him. The nobles of France hung about his anteroom, begging a 
word from him. 



By June or July, 1719, the crowd flooded into the Rue Quin- 
campoix. Doctors, lawyers, businessmen, clergymen, coachmen, 
scholars, and servants — people who had never seen it before — 
came trooping in to buy a few shares and sell them on the rise. 
The shares which had been 500 a little more than a year before 
were now 5000 and in two months more they were 10,000. 

As the crowds pressed into the street the demand for office space 
became a problem. Small rooms rented for as high as 400 livres 
a month. A house rented for 800 livres; one with thirty rooms 
turned into offices fetched 9000 livres per month. Shopkeepers 
rented space amid their barrels. Boxes were set up on a few roofs 
and rented. The brokers worked in the street. The managers in 
offices sent information to their agents in the street by means of 
signals from the windows or by bells — as in the old Curb Market 
in New York’s Broad Street. 

The noise of the spectacle spread through Europe. Speculators 
flocked to Paris. In October the Journal de Regence reported at 
least 25,000 had come from the leading commercial cities in a 
month. Seats in the diligences to Paris were sold two months ahead, 
and men began speculating in coach seats. 

As Christmas, 1719, approached the excitement became almost 
a public scandal. M. Law, a few days before the feast, was accepted 
into the Catholic faith at the Church of the Recollets in Melun, 
and on Christmas Day he and his children received communion 
at St. Roch’s, his parish church. He was made a warden to succeed 
the Due de Noailles. He made a princely gift of 500,000 livres to 
complete the edifice and another of 500,000 to the English at 
Saint-Germain-en-Laye. Then on January 5, M. d’Argenson, the 
former police chief who had sent Law out of Paris in 1708, re- 
signed as Comptroller General, and Law was named to that office, 
equivalent to Prime Minister of France. At this moment his power 
was almost supreme. 

Immense fortunes were being made. Fantastic stories are re- 
corded of the sudden flight to riches of barbers and coachmen. 
How many are true it would be difficult to say. Madame de Chau- 



mont, widow of a physician of Namur, made sixty million livres. 
Fargez, a private soldier, made twenty. The Due de Bourbon made 
a vast fortune, much of which he reduced to cash, re-established 
his financially embarrassed house, acquired many new estates, set 
up a stable of 150 race horses, and continued as one of the richest 
men in France. Other noble persons — the Due de Guiche, the 
Prince de Deux-Ponts, the Prince de Rohan accumulated immense 
sums. Count Joseph Gage made a fabulous winning and offered 
the King of Poland three million livres to abdicate in his favor. 
The Regent had a hundred thousand shares subscribed for at 5000 
livres which he could have sold for ten thousand or more. He had 
a paper profit in January, 1720, of 500,000,000 livres. It is doubt- 
ful if he realized any of this. 

But the last act in this tragedy-comedy began before the curtain 
had descended upon the triumphant scene in the preceding act. 
Well before Christmas, 1719 — perhaps as early as late October — 
the little cracks and fissures in the hollow walls of the structure 
began to appear. Law perceived them. The base of his System was 
the accumulation of all the metal money in the hands of the 
System, the issuance and control of the paper currency, and the 
creation of additional funds by means of bank loans. Perhaps in 
October Law saw that, for the first time, gold and silver were 
leaving the Royal Bank. Therefore when he renounced his ancient 
faith at Christmas and became Comptroller General, it was not 
merely to crown his triumph with the trappings of high office, but 
to put into his hands the supreme power he required to begin the 
battle to save his System. 

All the men who played this desperate game were not fools. A 
fairly rosy estimate of the probable income of the India Company 
was roughly 80 million livres. A more optimistic but unsound esti- 
mate looked for as much as 156 million. But 80 million would not 
come within many leagues of paying a five per cent dividend on 
600,000 shares valued at 10,000 livres. Indeed 156 million profits 
speculators saw this quickly enough and began to unload. Groups 
would pay only a little more than half the dividend. Wise foreign 



of them formed to peg the market at higher prices than 10,000 
livres while they quietly withdrew. Their example was soon fol- 
lowed by Frenchmen with the necessary wit. As they sold their 
shares they withdrew specie from the bank and transported it to 
other countries. Law saw this. By January the movement of money 
from the bank grew. The sellers were scornfully called realizers. 
They have appeared just before the last act of every boom from 
the golden age of Law to the New Era of Coolidge and the New 
Deal of Roosevelt. And with his elevation to the Comptroller 
Generalship Law began a losing battle to save the System. 

Here was his problem: for a brief moment he seemed, as one 
commentator put it, to have solved the philosopher’s dream of 
making men despise silver and gold. They preferred to louis d’or 
the paper promises of the three-year-old bank. Law’s paper livres 
would buy five per cent more in a trade than the metal coin of 
Louis XIV. But now quite suddenly the wiser ones were recovering 
their taste for silver and gold. Law’s problem was to check the flow 
of gold out of the country and into hoarding, to support the price 
of the shares, to save the value of his paper notes. 

Through January the tide flowed heavily against him. The drain 
on metal became alarming. The inflation became more fevered. 
Prices of goods that were around 104 in 1718 and 120 before 
Christmas, 1719, went to 149 in January. Wages lagged far behind. 
The nongambling populace began to murmur. The Parliament of 
Paris became more hostile. Serious men like Saint-Simon, Marshal 
Villeroi, La Rochefoucald and Chancellor d’Aguesseau, who had 
held aloof from the gamble, now became more severely critical. 

On February 22 the Royal Bank was suddenly turned back to 
the India Company. By this time over a billion in bank notes 
were outstanding. The issue had increased by 400 million since 
Christmas. Then on February 27 an edict was issued that no man 
would be allowed to have in his possession over 500 livres of specie 
— even goldsmiths and the clergy — and payments in specie could 
be made only in transactions of less than a hundred livres. This 
was difficult to enforce. But for the moment this did bring large 



amounts of specie back to the bank — perhaps as much as 
300,000,000 livres. 

Thus balked, the realizers now turned to real estate, furniture, 
plate, anything of solid value, as a refuge for their profits. One 
man bought up an entire edition of a dictionary. The inflation was 
in full flow in March. Prices were fixed but the attempt was futile. 
The hack coachman’s fee was thirty sous, but he openly demanded 
sixty. Candles were fixed at eight sous, six derniers per pound, but 
sold at twenty. The general index rose to 166. On March 5, an- 
other debasement of the coin was ordered. 

Law now sought to introduce a deliberate uncertainty into metal 
currency while stabilizing the price of paper by edict. On March 
20, the shares were falling rapidly from a peak of 18,000 livres. 
An edict announced that shares would be stabilized at 9000 livres. 
At this price the bank would exchange shares for bank notes or 
bank notes for shares. Two bureaus were opened. The crowds 
swarmed to them with their shares. They demanded notes for their 

By this means the bank became the owner of an immense amount 
of its own shares, while the flood of paper notes was enormously 
augmented. It gave the inflation another boost and prices soared 
to 179. The Rue Quincampoix was in the wildest disorder. The 
frantic bargaining went on late into the night. The sober citizens 
of Paris muttered deeply against the scandal. Many robberies and 
acts of violence added to the apprehension and indignation. Then 
suddenly one of those irrelevant outrages intruded into the scene. 
Count Horn, a young Flemish nobleman, related distantly to the 
Due d’Orleans and to several royal European houses, lured a 
speculator into a tavern at night, murdered him, and made off 
with his 1 50,000 livres. This crime shocked Paris. It gave Law an 
excuse to close the Rue Quincampoix and drive the gamblers away. 
Speculation was forbidden in the streets. The Count was arrested, 
convicted, and broken on the wheel in the Place de Greve. But the 
trading went on in side streets, alleys, hallways, and at night. 
Slowly it reappeared in the Place Vendome. Then Law paid 



1,400,000 livres for the Hotel de Soissons and its spacious gardens 
and permitted stockjobbing in the numerous pavilions of the gar- 
dens, which were rented to stockbrokers at 500 livres per month. 

By May the situation was desperate. The use of gold specie was 
forbidden beginning on May 1 , and this was to apply to silver specie 
on August 1. The circulation had now soared to 2,696,000,000 
livres. The general discontent was deepening. Prices had gone up, 
but wages had by no means kept pace with them. As June neared 
prices were at 190 but wages were only 125. Business was dis- 
rupted by the uncertainty of money values, the difficulty of getting 
coin, and the swiftly fading taste for paper. Political agitation 
was growing. The parliaments were becoming increasingly hostile. 
Law’s enemies — d’Argenson and the powerful Abbe Dubois, cor- 
rupt and ambitious, scheming for power now — succeeded in weak- 
ening his prestige with the Regent. At this fatal moment they 
were able to force an edict that sounded the doom of the System. 

The edict, issued on May 22, announced that the price of stock 
would be lowered to 8000 by July 1 and at the rate of 500 livres 
per month until December when it would be stabilized at 5000. 
Bank notes were also to be reduced in value from 10,000 to 8000 
livres and at the same pace to 5000 by December 1. Thus the 
promise that the bank notes would remain stable was broken. 
The whole paper structure collapsed. Men ran wild-eyed to the 
bank to beg for specie. Soldiers blocked the way. Parliament de- 
manded revocation of the edict. On May 28 this was done, but it 
was too late. The damage was done. 

Law went to the palace and asked the Regent to relieve him of 
his post. His resignation was accepted. And the Regent directed 
two companies of Swiss guards to protect him from the fury of the 
crowds. His wife and children went to a near-by estate of the Due 
de Bourbon for safety. 

But that immense tangle of adventures without Law was a skull 
without a brain. He was recalled before May expired and named 
intendant and a member of the privy council. The disorders pro- 
voked by the suspension of specie payments at the bank were so 



great that an order was issued permitting the cashing of ten-livre 
notes and hundred-livre notes on alternate days, one to a person. 
They could be cashed only at the bank. Fifteen thousand people 
gathered at the Mazarin Gardens. Only a few note holders were 
admitted to the bank at a time. The crowd felt it was being played 
with. It broke through the gates. The soldiers fired, killing two or 
three men. This set off an explosion of wrath. The bodies were 
carried about to exhibit the cruelty of the “murderer” from Eng- 
land. In London brokers made bets that Law would be hanged by 
September. Law’s carriage was torn to pieces. 

After this the battle was hopeless. With the Regent Law tried 
to work out some sort of reorganization. A plan was formed to 
retire 600 million livres of the notes. New stock in the company 
and of the city of Paris was issued payable in notes. It was merely 
exchanging stock for money. The notes were destroyed in the 
presence of a committee of citizens. 

Then another plan was attempted. It was proposed to issue an- 
nuities payable in notes. The bank was thus getting a long-term 
extension of its obligation to honor its notes. All notes above 100 
livres in denomination could be used only to purchase these annui- 
ties. But nothing could save the System. By September prices of 
food and clothing were 270 — they had been 120 the year before. 
Wages were only at 136. Actual wages — measured in purchasing 
power — had descended to 67. Thus the worker always is the 
sufferer by inflation. The demand for increased wages grew loud 
and angry. On October 10 an edict forbade the use of bank bills 
for currency. The stock of the India Company which had been 
worth 18,000 livres ten months earlier, was now sold for 2000 
livres payable in bank notes worth only ten cents on the dollar. 
On November 1 the redemption of even small bank notes was 
suspended. All stockjobbing was forbidden on the eighth. 

On December 10, worn out with sleepless struggles to save his 
System, the mob howling for his head, Law resigned. He retired 
to Guermande, one of his estates, six leagues from Paris. Some- 
time later two messengers arrived from the Due de Bourbon 



bringing to him his unsolicited passports to leave the country. 
This was the royal invitation to begone. The Duke offered him 
financial assistance, but Law refused. He had just got 800 livres 
in gold from his box at the bank. This, he said, was sufficient. 
But he accepted the coach of Madame de Prie, the Due de Bour- 
bon’s favorite. This nobleman, who had grown fabulously rich 
through Law’s adventure, alone was willing to befriend him. He 
left France on December 21, accompanied by four equerries and 
six guards — his restless coach to take up again its wanderings. 
His wife joined him later, after remaining in Paris to put his 
household affairs in order and discharge the bills of tradesmen 
and servants. 

The System itself, which had impoverished thousands and 
repeated the ruin of France, became a huge national bankruptcy. 
Duverney, an able but implacable enemy of Law, was charged 
with liquidating the disaster. The king, who was to be liberated 
from the curse of debt, was now more deeply in debt than be- 
fore. When Law began his deliverance the national debt was 

1.500.000. 000 livres. Now it was, counting rentes and guaranteed 
stocks, over 3 billions. Instead of 48 million livres a year in 
rentes, the crippled government was saddled with 99 million. In 
January, fifteen boards were set up with 800 clerks to survey 
the ruin and demobilize it. Over 511,000 persons made claims 
amounting to 2,222,000,000 livres. They were reduced to 

1.676.000. 000. India shares were cut from 125,000 — all that re- 
mained outstanding after being exchanged for annuities — to 
55,000 shares bearing interest of 150 livres each instead of 360. 
The national debt was finally fixed at 199 million livres, and there 
was 336 million livres of specie in the bank against its multitude 
of claims. The trading business of the India Company was dis- 
entangled from the financial mess, the company was reorganized 
and continued to operate and in time even to flourish for many 
years in rivalry with the trading companies of England and the 

As for Law, the government confiscated all that he had left 



behind in France, his numerous estates, art treasures, plate, his 
hundred-thousand-a-year annuity for which he had paid five mil- 
lion livres, his 4900 remaining shares in the India Company. 

When he left France he went directly to Brussels. He was re- 
ceived with acclaim, entertained lavishly, appeared at the theater 
where a great throng greeted him. Then in a few days he set out 
upon his travels to Venice, to Bohemia, to Germany, to Denmark. 
He was sorely pressed for money. He, who the year before saw 
millions flowing through his hands, wrote the Countess of Suffolk, 
begging a loan of a thousand pounds. Later, at least one biog- 
rapher reports, the Due d’Orleans, the Regent, sent him yearly 
his old salary, which is variously reported as from ten to twenty 
thousand livres. But the Regent died in 1723 and this aid came 
to an end. 

Before this, however — in 1722 — Law went to London, invited 
thither apparently by the Prime Minister. He went aboard an 
English warship as the guest of its commander. In London his 
presence and entertainment provoked an outburst of criticism in 
Parliament against the Prime Minister, Walpole. But that states- 
man replied that Mr. Law was merely a British citizen who had 
come home to petition for His Majesty’s pardon. Surely no fugi- 
tive from justice had ever returned quite this way before — an 
honored guest aboard His Majesty’s vessel of war. It was indeed 
true, however, that his old sin — the killing of Beau Wilson — had 
dogged his footsteps. Apparently he had made earlier some com- 
position with Wilson’s relatives. He appeared now before the 
King’s Bench attended by the Duke of Argyle and Lord Islay 
and others and was formally shriven of the old conviction. 

He remained in England until 1725, from where he carried on a 
correspondence with the Due de Bourbon, following the Regent’s 
death, begging for the restoration of his fortune. Law never con- 
ceded that his System had failed. It had been ruined by enemies. 
He clung tenaciously to the hope, nay the expectation, that the 
Regent would summon him back to France. It is certain that 
gentleman always entertained a friendly feeling for his former 



minister. But the death of Orleans in 1723 ended these hopes. 
Law sank gradually in his pecuniary fortunes until toward the 
end he was not far removed from poverty. He died in Venice, 
March 21, 1729. 

It is difficult to disentangle the fibers of Law the gambler and 
Law the reformer. His great reforms — his prodigious adventure 
in recasting the fortunes of a bankrupt empire — took much of its 
energy and substance from the gambler’s art. 

As a New Dealer he was not greatly different in one respect 
from the apostles of the mercantilist school — the Colberts, the 
Roosevelts, the Daladiers, the Hitlers and Mussolinis, and, in- 
deed, the Pericles — who sought to create income and work by 
state-fostered public works and who labored to check the flow of 
gold away from their borders. He introduced something new, 
however, that the Hitlers, the Mussolinis, the Roosevelts, the 
Daladiers, and the Chamberlains have imitated — the creation of 
the funds for these purposes through the instrumentalities of the 
modern bank. Law is the precursor of the inflationist redeemers. 
Like all the inflationist salvations, his career was short. The 
others will not be long. 

But he did develop a new technique of money getting. He did 
not invent, but he did perceive, the possibilities of two instrumen- 
talities that have been at once the blessing and the curse of the 
modern world. The art of accumulating great wealth had con- 
sisted in sharing in a fraction of the labor product of a large 
number of people. The monarch had taken his by taxes; the 
politicians had taken theirs by intercepting the flow of taxes to 
and from the state; the slave owner had taken his by brute force; 
the landlord had taken his by owning the land that was the source 
of wealth drawn from it by many workers; the merchant had 
taken his by gathering into his hands the product of many small 
producers, finding a market, and taking a toll on each sale. The 
moneylender had got his portion because his loans enabled him 
to participate in the profits of many farmers, merchants, and 
producers. The wealth was drawn out of the current income of 



many people. But Law, by means of speculation in corporate 
securities, found the means of extracting from many men a part 
or all of their savings. 

He exploited the eagerness of men to grow rich by making 
their profit, not in producing goods or creating utilities, but gam- 
bling on the changes in the price of investment certificates. He 
perceived also the uses of the bank as an instrument for creating 
an immense reservoir of savings funds as well as an instrument 
for actually manufacturing money — bank credit. 

It would be a long time before the full possibilities of these 
weapons would be realized by the acquisitive man. Indeed it 
would not be until our own time that this would be done. But it 
has been done, and this civilization will not find its way to peace 
and grace until it learns how to get these implements out of the 
hands of the acquisitive enemies of society. Oddly, two hundred 
years after John Law, the gambler-philosopher, wrought upon 
society, one may see everywhere the good and the evil fruits of 
his brief adventure permeating our whole economic edifice. One 
may say of him as of Christopher Wren — if you would see his 
monument, look about you. 


The Rothschilds 



In the Rothschilds we come upon an elemental energy that can 
be described as nothing less than an organized appetite. The 
founders of this fortune were driven by nothing short of an 
acquisitive fury. 

There were five brothers — Anselm, Solomon, Nathan, Carl, 
and James, in order of their ages — all devoted with a complete 
singleness of purpose to the hunt for money. One only possessed 
a mind of the first caliber — Nathan, to whose predatory imagina- 
tion the house owned its dazzling rise. The House of Rothschild 
became in the Europe following the Napoleonic wars a five- 
headed octopus, an international banking house with headquar- 
ters in five countries — Nathan in London, James in Paris, Solomon 
in Vienna, Anselm in Frankfort, and Carl in Italy, listed in the 
order of their importance. The central office was in Frankfort 
and Anselm was the titular chief. But always Nathan was the real 
chief, and London during his life was the real capital of the 
Rothschild empire. 

They were coarse, unlettered, graceless. Friedrich von Gentz, 
the hired shirt stuffer in chief, who sold his brilliant pen to gild 
their lowly origins, said privately that “they were vulgar and 
ignorant Jews” who pursued their craft “in accordance with the 
principles of naturalism, having no suspicion of a higher order 
of things.” 

There are such things as “vulgar, ignorant Jews,” just as there 
are vulgar and ignorant Germans and Italians and Americans. 
The Rothschilds were coarse, illiterate, and brash. 




Nathan said of his children that he “wished them to give mind, 
soul, heart, and body to business.” They were interested not in 
business but in money. They sought money not to enjoy power; 
but power in order to make money. Veblen’s diagnosis of the 
acquisitive urge, as the craving to have what others have, to 
match the possessions of others, and to procure and exhibit the 
evidences of those possessions, did not apply to the Rothschilds 
any more than it applied to Hetty Green or Russell Sage. The 
rich James, escaping from the squalor of the Judengasse of 
Frankfort into the Paris of Napoleon, took quarters in a humble 
flat until he learned that he could do more business in the magnifi- 
cent palace of Fouche. The time came when the brothers saw 
that palaces filled with works of art were better instruments of 
money getting. But they went in for magnificence to make more 
money and not for money to acquire magnificence. 

They came upon the scene when a revolution greater than the 
French Revolution was changing the way of the world — the in- 
dustrial revolution, out of which vast fortunes would be made. 
But it touched them not at all, as little, indeed, as the French 
Revolution touched an industrial genius like Robert Owen. They 
founded no industries, produced nothing, created nothing, in- 
vented nothing. The popular notion, fostered by some of their 
hired apologists, that they were the founders of the modern 
banking system, that they invented modern methods of foreign 
exchange, that they were the first international bankers, that 
they were the first to perfect the modern technique of distributing 
shares, and that they are entitled to the dubious glory of having 
first perfected the methods of security manipulation, is utterly 
without foundation. 

There were international bankers two centuries before their 
time — the Fuggers, the Medici, the FrescobaRli, and the Bardi. 
There were great and powerful bankers in their own day against 
whom they were compelled to contend — the Barings in England 
and the brilliant Ouvrard, financier of Napoleon, in France; even 
in their own native Frankfort there were Gontard and Bethmann, 



ancestor of that von Bethmann-Hollweg who took the Germany 
of Kaiser Wilhelm into the First World War. 

Their immense success was due to their immense preoccupation 
with the business of making money and to the acquisitive genius 
of one of their number. Certainly that success was almost fabu- 
lous. When the French mobs poured into the streets of Paris to 
destroy the Bastille and prepare Louis XVI for the headsman, 
the Rothschilds were isolated in the ghetto of Frankfort, match- 
ing in servility any of their neighbors in stepping from the side- 
walk before the passing Christian Frankforter. When the Bour- 
bon Louis XVIII returned to Paris after the Revolution and the 
Napoleonic eruption had run its course, he went to his throne 
with a million francs of expense money supplied by the Roths- 
child brothers. By that time they were the richest men in Europe. 


Over the origins of the Rothschild fortunes some obscuring 
vapors hang — pestilential vapors partly, blown there by that 
archliar of history, the shirt stuffer. 

How much falsehood history owes to the hired biographers and 
apologists of monarchs and statesmen and money kings! How 
the rich Maecenases in all ages, “patrons of art and letters,” 
have been responsible for the mendacious chronicles of their time 
that have flowed around their feet from the pens of grateful poets, 
essayists, historians, and even philosophers! 

As the Rothschilds grew in wealth and power, and statesmen 
and noblemen and even kings hungered for their pounds and 
gulden, they could never rid themselves of the dark veil of race 
and culture which hung between them and their noble clients. 
The rich banker Bethmann of Frankfort might treat familiarly 
with Solomon in his office or at the Boerse, but Bethmann’s table 
was not open to him. The brothers might wear their ribbons and 
their titles and find themselves in the drawing rooms of impecuni- 
ous finance ministers whose governments were in desperate need 



of funds, but there were still droves of snooty lords and ladies 
who drew away from the “upstart Jews” who still spoke with the 
crude accent of the Judengasse Yiddish, heavy on their con- 

There was, therefore, one point on which they were most 
particular — the question of their origin. It was dogging their 
footsteps. In the salons of the great the brothers were unable to 
rid themselves of the odor of the old ghetto junkshop. They 
wished to have it settled, therefore, for all time that they were 
not upstarts, that they were as well born as some of those who 
lifted their nostrils at them; that they were the scions of a man 
of wealth, of high standing in the court circles of Hesse-Cassel, 
the financial adviser of a ruling house, bankers to whom the 
richest prince in Europe, when driven from his capital, had en- 
trusted his whole fortune. 

For this purpose they employed a gentleman, not unknown to 
fame, named Friedrich von Gentz. Gentz was the secretary of 
Metternich, Chancellor of Austria. He began life as a passionate 
supporter of the principles of the French Revolution; he ended 
as the aide of the most reactionary statesman in Europe. He was 
the author of many essays and several books, one of them a 
brilliant dissertation, On the State of Europe Before and After 
the French Revolution, which was translated into English at the 
time by John Charles Herries, Commissary General in the Liver- 
pool cabinet, another intimate of the Rothschilds whom we shall 
meet anon. 

Gentz was a man of scholarly attainments and charming man- 
ners who wrote excellent German prose. He made the perfect 
type of Tawney’s predatory scholar, who aches for the sweet- 
meats of life and, not knowing how to make money himself, 
fastens himself upon some rich patron whose resources he can 
tap. Gentz was not at all discriminating in his patrons. He was a 
sort of literary street walker. He took money from everyone who 
had need of a sustaining paragraph or a scrap of influence at the 
foreign office. He was a thoroughly corrupt writer who jotted 



down in his diary with keen satisfaction the record of the bribes 
he received, the Rothschilds’ name being among the most frequent. 

Solomon Rothschild first met Gentz at Frankfort, preceding the 
Aix-la-Chapelle conference. The Rothschilds were seeking help in 
saving the Frankfort Jews from the cancellation of the privileges 
they had won under Napoleon’s regime. When Metternich reached 
Frankfort, Gentz presented Solomon. Solomon handed him 800 
ducats. For a number of years thereafter the Rothschild ducats 
flowed into Gentz’ yawning pocket while the Gentz influence and 
tips flowed to the Rothschild banking house and the Gentz healing 
phrases flowed over the Rothschild fame. 

In 1826 the Rothschilds paid Gentz a princely fee to plant in the 
popular Brockhaus Conversational Encyclopedia the story of the 
descent of the five brothers from the great banker of Frankfort. 
Solomon outlined what he wanted; Gentz wrote it in a pamphlet 
and contrived to have the pamphlet made the basis of the Brock- 
haus article. The article recounted the story of the flight of the 
wealthy Elector of Hesse before Bonaparte’s advancing armies 
after having confided his whole vast fortune to Meyer Anselm 
Rothschild. So well did he manage the fortune in the Elector’s 
absence that in its performance he sacrificed his own. When the 
Elector returned, old Meyer Anselm was able to restore the entire 
fortune intact with interest. And so grateful was the Elector that 
he insisted on Meyer retaining the use of the funds for several 
years mure without interest. 

This preposterous fiction has one prototype in modern burlesque 
humor — the story of the Jew who stood on Broadway throwing 
away five-dollar-bills while a Scotchman retrieved and returned 
them. For the Elector himself was the crustiest, most avaricious 
and suspicious gulden-squeezing old rascal in Europe. The whole 
tale is an invention fabricated by the Rothschilds — along with 
some other biographical fictions — to advertise the story that they 
were of excellent blood. There were many of excellent blood in the 
old Frankfort ghetto who bore their martyrdom with dignity and 



found surcease in the contemplation of the things of the spirit. But 
the Rothschild brothers were not of this number. 

______ . in 

Meyer Anselm Rothschild, the father of these five dynamic sons, 
was born in the Frankfort ghetto in 1743. His father was a small 
tradesman who, perhaps, did a little moneychanging. The family, 
originally named Bauer, lived in a small, cramped ghetto dwelling 
that bore as its distinguishing mark a red shield. Thus they came 
by the name they later adopted. 

Meyer was sent to a Talmudical college near Nuremberg to 
become a rabbi. But his father died when he was only twelve and 
he was forced to find work. He spent eight years in the bank of 
the Oppenheims in Hanover. His two brothers carried on the busi- 
ness in an even more crowded little shop that bore the sign of the 
saucepan. It sank to the level of a mere junkshop, dealing in the 
secondhand castoffs of the ghetto. Meyer returned from Hanover 
to join his brothers in trade. With the Oppenheims he had learned 
the business of coin collecting. He added this line to the secondhand 
trade. The brothers prospered after a fashion, the coin collecting 
forming but a small part of the business. The three made about 
two thousand gulden a year among them. 

Meyer’s coin collecting, however, brought him into touch with 
some of the noble families around Frankfort who could afford this 
hobby, among them the officials of the Landgrave of Hesse-Cassel. 
He sold rare coins to the Landgrave though he never met him. This 
added to the prestige of the small shop, however, particularly when 
the Landgrave conferred on him the title of Crown Agent. The 
title meant little, corresponding roughly to the English designation 
of a royal trader who may use the term “By Appointment to His 

He married the daughter of a prosperous tradesman — Guetele 
Schnapper, destined to be enveloped in a hazy glow of sentiment by 



biographers of her famous sons. She bore him twelve children — 
five of whom were those famous sons already named. In time one 
of Meyer’s brothers died and another drifted off for himself, leaving 
Meyer in sole possession of the shop zur Hinterpjan. And there he 
remained until 1785, when he was forty-three — a small tradesman, 
dealing chiefly in tea, coffee, sugar, and spices, changing money 
and expanding his coin-collecting business, getting along slowly. 

In 1 785 he moved to a new home which he bought. It was marked 
by a green shield. Thus the family of the Red Shield found them- 
selves living at the sign of the Green Shield. It is a narrow dwelling 
— for it still stands — four stories high. The Rothschilds occupied 
one half, a secondhand dealer the other. Meyer’s shop was on the 
first floor. The family lived in severely cramped quarters above. 
And here in this small, crowded home in the Judengasse, with a 
secondhand store for a neighbor, the elder Rothschild remained 
until he died in 1812. 

Meyer sought earnestly to get a little of the banking business of 
the rich Landgrave of Hesse who had given him the empty title of 
Crown Agent. He had struck up an acquaintance with Buderus, 
the Landgrave’s confidential financial agent. But even this failed 
to bring him anything more than some coin sales. 

It was not until 1795 that he began to make large profits. In 
1790 his earnings, according to Berghoeffer, were from 2000 to 
3000 gulden a year. By this time he had three sons in the business. 
This was not a large annual profit to divide among four. But in 
1795 the conquest of Holland by Napoleon had caused the col- 
lapse of the Amsterdam bourse and diverted much of that business 
to Frankfort. A war trade had grown up as soon as conservative 
Europe had launched her attack upon Napoleon in 1792. In 1795 
Frankfort became the center of that trade. The three energetic and 
aggressive sons — Anselm, Solomon, and Nathan, the last then 
eighteen years old — were partners and had assumed the driving 
control of the business. 

Yet even then the business was a small one — trading in cloth, 
sugar, tea, indigo, and textiles. It employed only the sons, two 



daughters in the shop, and one daughter-in-law. Frankfort began 
to sparkle with the profits of the war boom. It was full of rich 
citizens — a few years later an estimate showed eight hundred 
citizens with unencumbered cash of more than 50,000 gulden each. 
But the Rothschilds still shared with the secondhand store the 
small building at the sign of the green shield. As late as 1810, with 
only two years to live, at the age of sixty-seven, after the sons 
had gone far in the amassing of war profits, Meyer reconstituted 
the partnership and in the articles put the firm’s capital down as 
only 800,000 gulden. Two years later he died, still holding forth 
in his small shop, after several years of poor health. Whatever 
growth the business had after 1795 was due to the sons and not to 
Meyer Anselm himself. 


Before proceeding further we must pause to have a look at 
William, Landgrave — and later Elector — of Hesse-Cassel, with 
whose fortunes the first flights of the House of Rothschild were 
made. In a book of money-makers this curious old prince might 
well rate a chapter for himself. 

Hesse-Cassel was a small principality in central Germany and 
just north of Hanau of which Frankfort was the principal city. 
The ruling house had worked up for itself one of the most impudent 
rackets for making money. For a hundred years the landgraves 
made a business of forming and drilling armies and hiring them 
out to other rulers for war work. The biggest haul made by these 
drovers of men was by the Landgrave Frederick II, who hired 
22,000 Hessian troops to George III for £3,191,000. These were 
the celebrated Hessians who won such a dark immortality in our 
Revolutionary War. William IX was the son of this Frederick. He 
had a small subsidiary principality of his own before his father’s 
death and, like a true scion of his father, he had his own small army 
which he too hired out to England, cleaning up a million or two 
for himself. 



This William, however, had a special flair for finance and an 
acquisitive urge which amounted to a disease. He was a heavy 
investor all over Europe, particularly in England, a lender of money 
to tradesmen, financiers, and his fellow princes. So that in 1785 
when his father died and he united his own fortune with the 
hereditary accumulations of his house he was, perhaps, the richest 
man in Europe. 

As affairs on the Continent sank into the disorder which fol- 
lowed the French Revolution William kept a large part of his 
fortune in England. He invested heavily in consols, but he made 
numerous loans to statesmen, princes, bankers. The Prince of 
Wales borrowed £200,000 and the Duke of York and Clarence also 
owed him large sums. He made large advances to the Austrian 
emperor, the king of Prussia, and to most of the lesser potentates of 
the Holy Roman Empire. And if his brother rulers despised him for 
his traffic in his soldiers, he was none the less cultivated by them 
because they never knew when they would want access to the 
treasure box of this royal Shylock. But he did not overlook the 
small loan business. He spent his life haggling over notes and bills 
and interest rates, bargaining and scratching to squeeze the last 
drop of interest out of bankers and tradesmen and petty lords in 
his own domain. 

He was a man of two passions. One was his gulden. The other 
was women. But apparently he was not a promiscuous roue. He 
adopted one mistress after another, but clove to her with a curious 
fidelity during her special chapter. He married Wilhelmina, daugh- 
ter of Frederick V, King of Denmark. She brought him a dull 
soul and a frigid body. And so he turned for love to the wife 
of a master of his horse, whom, in turn, he turned adrift. Next 
he took up with the daughter of a commoner, by whom he had 
four children before his fidelity cooled and he tossed her back to 
her native purlieus. His next affair was with Rosa Wilhelmina 
Dorothea Ritter, educated, well born, assertive, who gave him 
eight children and forced him to give her an estate and a title — 
Frau von Lindenthal — before she incurred his displeasure by 



a flirtation with a subaltern. His next love was Juliane Albertine 
von Schlotheim, who added nine children to his collection of 
bastards. He induced the emperor to make her a countess and 
installed her in a palace. Thus he had twenty-four children, though 
less reliable historians endow the fecund old Turk with almost 
twice as many. 

He provided for all these establishments. The support of so 
extensive a barnyard was a great burden, so the grasping prince 
who recruited an army and farmed out his soldiers like convicts 
shifted the burden of his bastard brood to the shoulders of his 
subjects by levying a special salt tax for their support. Some of 
his sons went into the military service of various kings. The most 
famous, or infamous, was that General Haynau — son of Frau von 
Lindenthal — who came to be known as the “Hyena of Brescia.” 

Into the treasury of this prince flowed a continuous stream of 
remittances from England, Austria, Prussia, and all the smaller 
states of Europe. They came in the form of bills of exchange. 
Meyer Anselm, for years, petitioned the Landgrave to grant him 
the privilege of cashing some of his bills of exchange. He did suc- 
ceed in doing some of this business. But when Meyer sought to do 
a little of the Landgrave’s banking business he was persistently 
excluded. As late as 1798, when Meyer was fifty-five, and William 
was making a loan of a million gulden to the Emperor of Austria, 
the Rothschilds could get no part of the transaction. 

By 1800 the Rothschilds’ fortune had grown. But it was the 
product not of Meyer but of his energetic and resourceful sons. 
They then began to do some profitable business with the Land- 
grave. They got from him a loan of 160,000 thalers in 1801 and of 
200,000 in 1802. The next year they broke the ice in a state bank- 
ing operation. They handled a loan from the Landgrave to the 
King of Denmark, his relative. William wished to remain anony- 
mous because he had been showing a poor mouth to his family. 
Buderus arranged to have the transaction handled by the Roths- 
childs. After this the firm continued to render more and more 
services to the prince. 



But this was accomplished by the simple expedient of taking 
Herr Carl Frederick Buderus, the Landgrave’s confidential finan- 
cial officer, into partnership. Put differently — the Rothschilds 
bought Buderus. This came to be the standard practice with the 
young men. They used money to buy what they wanted, including 
statesmen and their agents, as they were later to buy Gentz and 
as they bought sugar and indigo and other merchandise. Out of this 
corrupt arrangement Buderus became wealthy and died a mil- 

They were now bankers and, to an increasing extent, thanks to 
Buderus’ intercessions, bankers for a prince who, if not an im- 
portant man, was at least a rich one who lent money instead of 
borrowing it. But they were far from being more than a third-rate 

In 1806 Napoleon established the Confederation of the Rhine, 
adding Hesse-Cassel to the kingdom of Westphalia, which he gave 
to his brother Jerome. His armies under General Lagrange occupied 
William’s capital and the terrified Landgrave, now raised to the 
dignity of Elector, fled for his life. He hid some 120 chests of 
papers and securities and valuables in his various castles and left 
his power of attorney with Buderus. He deposited with the Austrian 
ambassador for safekeeping several chests of live securities, bills 
of exchange, cash, and jewels. 

This is the episode that Friedrich von Gentz made the basis of the 
yarn that the Elector had left his entire fortune in the keeping of 
the elder Rothschild. As a matter of fact, he left just two chests 
containing unimportant papers with the Rothschilds. The French 
immediately started a search for William’s effects. They found the 
hidden chests in his castles. But Lagrange, the French commander, 
reported that the assets found were worth four million instead of 
sixteen million. He delivered the unreported assets into the hands 
of Buderus. For this he received a bribe of 1,060,000 francs. The 
Rothschild home was raided. But the Rothschilds had received a 
tip of the coming search from Dalberg, the head of the Confedera- 
tion of the Rhine stationed in Frankfort and Napoleon’s tool. The 



Rothschilds had bought him too with a loan and kept him bought 
with a succession of loans. The search of the house revealed little 
and was terminated before it was finished by a bribe to Savagner, 
the French police chief, and a modest loan of 300 thalers to the 
officer in immediate direction of the search. The first thing the 
Rothschilds looked for on a minister or his agent was the price tag. 
They learned that their money could buy almost anything. 


We are now to look at the larger ingots of the Rothschild fortune 
in the casting. Up to 1806 their riches were like a victory at chess 
- — an accumulation of small advantages. These riches were now 
about to swell swiftly into an immense tumorous growth. 

The Frankfort brothers were making their modest accumulations 
up to 1 795 in small-scale moneylending, handling bills of exchange, 
but chiefly in trading, in textiles, coffee, tea, sugar, and, perhaps, 
indigo. England was the great market for these things. Save for 
textiles, they flowed in from her colonies. In textiles, the industrial 
revolution was well under way, and she had become the chief wool- 
and cotton-cloth weaver of the world. But with the rise of the war 
trade these Rothschild profits began to soar. Nathan, then twenty- 
two, was sent to Manchester as a sort of buyer of cloth. This was 
a stroke of fortune, for Nathan was the family genius, and England 
was to be the financial capital of the world. 

The young, short, obese Frankforter, looking almost comical, 
speaking but little English heavily macerated by the strange Yid- 
dish pronunciation of his ghetto German, was a blaze of business 
energy. He boasted that he quickly multiplied his £20,000 capital 
to £60,000 — but he was a most mendacious witness when boasting 
of his prowess as a money-maker. However, he did prosper amaz- 
ingly. In 1804 he went to London to extend his operations. 

There had been a pause in the fighting in Europe after the 
Treaties of Luneville in 1801 and Amiens in 1802. But in 1803 
England resumed naval warfare on France and by 1806 the whole 



Continent was aflame with the new assault upon Napoleon when 
Russia, Prussia, and Austria united in the attack. And once again, 
upon an even greater scale, the war profiteers proceeded to multiply 
their gains. 

We now see Nathan leading his brothers in four swift episodes 
which were to land the five brothers among the richest houses in 
Europe. As late as 1810 they were unknown to official London as 
capitalists. In 1815 they were the bankers for the British govern- 
ment and the most powerful single unofficial force in Europe. 

These four episodes were the smuggling trade against Napoleon’s 
commercial blockade of England, the traffic in Wellington’s bills 
and notes in the Peninsular war, the commission from the British 
government to convey funds to Wellington’s army in Portugal and 
Spain, and, finally, the difficult job of transporting the British 
subsidies to her allies on the Continent. 


The first episode involved an adventure in large-scale smuggling. 
In 1806 Napoleon decided to crush England’s commerce, to strike 
the despised shopkeeper whose flourishing trade nourished the 
armies of England. He declared his famous commercial blockade. 
England replied with an embargo and a blockade of all French 
ports. As the whole Continent needed British goods desperately, 
what had been a profitable war trade now became a more profitable 
smuggling industry. The Rothschilds had been making large profits 
in this war trade. They now, under Nathan’s leadership, plunged 
into the smuggling adventure with all their resources. 

Fortune favored them. With Nathan in England and the brothers 
on the Continent the firm was well equipped for the job. More- 
over, Napoleon was soon to learn that the hand with which he 
sought to strangle England was also starving France; that the 
hated shopkeepers of perfidious Albion had upon their shelves 
merchandise that Frenchmen sorely needed. England too, which 
outwardly sealed the ports of France, found she needed markets 



in France and in Europe to create for her the credits essential to 
get funds to her allies. And so one necessity yielded to another. 
Napoleon, while publicly thundering destruction to the trade of 
England, managed to open a back door into France through which 
greatly needed supplies could be smuggled. 

We had the spectacle of both governments winking at their 
decrees and smugglers actually squeezing past conniving officials 
the merchandise France wanted. Indeed, by a decree in the summer 
of 1810, the Emperor actually legalized and regulated the outlaw 
commerce. The bootleg captains clandestinely sneaked their con- 
traband into France at Gravelines under the eyes and protection 
and patrol of the police at a port officially set aside for the traffic. 
The Rothschilds made the most of this. 

But Nathan needed more capital. He saw with dismay the great 
profits others were making. His mind turned to the Elector of 
Hesse, an exile in Prussia. His brother Anselm was getting closer 
all the time to the Elector’s good graces — thanks to Buderus. The 
Rothschild house in Frankfort was handling more of the Elector’s 
loans and collections. And Nathan in London was managing the 
transmission of the interest on some £640,000 of the Elector’s in- 
vestments in consols. Continental business and investments were 
subject to grave perils. Why should not the Elector invest the im- 
mense sums in interest and in principal that were flowing to him 
in English consols — and do it through Nathan? Nathan pressed 
Buderus to aid with his influence. But for some reason the Elector 
seems to have been suspicious of Nathan. However, after much 
pressure, Buderus convinced the Elector to follow Nathan’s advice. 
Thereafter an immense sum was put into Nathan’s hands for in- 
vestment in English consols. 

How much he got is not precisely clear. Rothschild boasted that 
it was £600,000. It was probably something less, about £550,000. 
But it was not all sent in one remittance. It was delivered to Nathan 
over a period of several years — in three installments. This was 
authorized in February, 1809. But Nathan did not buy consols 
with it. Instead he used it for his own purposes — appropriated it 



to his own uses, feeling sure, of course, that he could restore it 
when pressed. Here we have the banker-agent of the avarhious 
Elector using for his own purposes the funds entrusted t* him 
by his principal, on the advice of that principal’s confidential 
financial official who was himself in the pay of the banker. And in 
the very month this was done Buderus’ partnership in the Roths- 
child firm was reduced to writing. 

As Rothschild purchased no consols it was impossible for him 
to forward the Elector receipts for their deposit in the Bank of 
England. William became uneasy. He demanded the receipts. He 
prodded Buderus. For over two years Buderus quieted his fears 
with one explanation or another. But in the end he lost patience 
and confidence. He demanded the instant delivery of the evidence 
that his funds had been used as directed and he gave orders that 
no further sums should be remitted to Nathan. 

This was an audacious enterprise. That Nathan persisted for 
nearly three years in the face of the Elector’s continuous demands 
is an evidence of his own daring calculations. The embargo fur- 
nished him a sort of excuse for his delays. And as consols were 
dropping in price he knew he could at any moment buy all that 
was needed to satisfy his noble patron. But the possession of these 
large funds was of the first importance to him in the enormously 
profitable smuggling and bill traffic during the period of the em- 
bargo. The profits of this were probably the chief source of the 
fortune the Rothschilds were rearing. 

VII . 

The next episode has to do with the Rothschilds and the difficul- 
ties of the Duke of Wellington on the Peninsula. And this historians 
have managed to envelope in no end of fog. One minimizes it. 
Another accepts Nathan’s own version that it was undertaken as 
a patriotic adventure to aid Lord Wellington in Portugal and Spain. 
Another describes it as the daring enterprise of a freebooter banker 
from which he made numberless millions and thus laid the ground- 



work of his whole fortune. And none clears up the procedure by 
which the enterprise was carried on. The facts as far as they may 
be unraveled follow. 

In 1808 Napoleon forced his brother upon the throne of Spain. 
Madrid revolted and improvised a large army. England saw an 
opportunity in this to drive the usurper out of the Peninsula, and 
sent an army to Portugal. Wellington was one of its generals, but 
in 1809 became commander in chief. 

The great problem was to get supplies to Wellington. Oporto 
and Lisbon were 600 and 800 miles from the nearest English port, 
and the sea was infested with enemy ships and privateers. Metal 
was too scarce to permit so much risk in its shipment, and Well- 
ington needed money to pay his troops and purchase certain local 

There grew up much the same bitter controversy about this as 
there had been between Lloyd George and the apologists of General 
Kitchener in the First World War over the inadequacy of supplies 
and funds. Wellington felt himself trapped. In desperation he began 
to purchase supplies from Portuguese merchants and to pay them 
with bills on the English Treasury. These bills were not much good 
in the hands of Portuguese and Spanish merchants until they were 
exchanged for gold or silver. Hence a trade sprang up in the notes, 
carried on by Sicilian, Italian, and Maltese bankers known as the 
“Cab,” with headquarters at Malta. They bought the notes from 
the local merchants at small prices and relayed them through a 
series of hands and discounts until they reached London. 

This made everything Wellington bought cost several hundred 
per cent more than even the high war prices in vogue. The Treasury 
protested. Wellington hurled back criticisms at the Treasury and 
the Commissary General. He said bitterly that the government 
cared nothing about his armies. His men, he wrote, remained unpaid 
for two months and had to sell their shoes and clothing for food 
and medicines. He intimated that England should abandon the 
whole expedition. “A starving army is worse than none,” he com- 
plained. “We want everything and get nothing.” He protested 



against the red tape and inefficiency of the Commissary which 
“must trace a biscuit from London to the man’s mouth at the 
frontier.” He went so far as to threaten to embark his army out of 
Portugal, leaving England exposed to the peril of an invasion, 
when her king would then learn something of the horrors of war. 

Being in the smuggling trade Nathan of course knew all about 
this. This traffic in notes was too enticing to be resisted. And he 
went into it. How deeply he actually went in and how he managed 
it are by no means clear. One account has it that he summoned 
his brothers, Carl and Solomon, and later James; that Carl traveled 
to the Spanish border and bought up the notes with gold, then 
returned, meeting his brother Solomon halfway, exchanging his 
bills for a fresh supply of coin brought by Solomon, who then made 
his way to the French coast where he met Nathan, with whom he 
again exchanged notes for gold, Nathan taking the Wellington bills 
to London and exchanging them for guineas. 

Another account is that Nathan had merely cashed some of the 
bills from the Cab and later planned to enter the trade — without 
actually doing so — in order to help Wellington. 

What is doubtless nearer to the truth is that the Rothschilds did 
deal extensively in the Wellington notes and, probably, would have 
dealt far more extensively if another incident had not intervened. 
How much Wellington issued in bills seems not to have been fixed 
by fiscal historians. It would be a very surprising fact if the whole 
amount exceeded a million pounds. It is also certain that he did 
this not as a regular thing but only when pressed by necessity. It 
is also known that a number of bankers shared this trade among 
them, that it was in progress for some time before the Rothschilds 
entered it. It is therefore altogether probable that they got merely 
a share of this traffic. Indeed, the English Commissary Herries 
himself, who was closest to the whole business, said that the Cab 
had for a time managed to establish a monopoly of the trade. We 
may therefore conclude that the Rothschilds got a good deal less 
than half of this trade. 

It is also difficult to believe that so much gold could be trans- 



ported by a single traveler. A hundred pounds of gold would be a 
very onerous burden to a man traveling through hostile country, 
swarming with spies, under difficulties of transportation hardly 
conceivable today. The number of trips that must have been made 
to transport as much as a million pounds, or half that much, would 
be quite beyond the physical resources of the brothers. 

While the profit was great, a number of persons had to share in 
the discount and many hands had to be greased. So that we may 
safely assume that whatever profit the Rothschilds made out of 
this has been grossly exaggerated. But they did make a profit and 
a large one and they were, undoubtedly, preparing to make a 
greater one by a more intelligent means of transmission of gold 
to Wellington when circumstances shaped themselves, almost with 
the appearance of destiny, to put these five young men upon the 
express highway to fortune. 


This new turn of affairs arose out of the following facts. Roths- 
child’s difficulty in the Wellington note traffic was gold. The 
guinea, said Herries, was an article of luxury. Every quarter of 
the globe was ransacked for specie. The Rothschilds, with their 
expanding trade areas, were doubtless able to gather a great deal. 
But there was a limit. In London a ship of the East India Company 
brought in a cargo of gold. According to custom, it was offered at 
public auction. Nathan Rothschild bought this for £800,000, using 
all the cash and credit he had, plus the funds of the Elector in his 
charge. In later years he said he planned to send this to Wellington. 
Some historians have accepted this version. But the notion that this 
predatory man entertained any such fantastic stratagem attended 
with so much risk is as preposterous as the yarn about his father 
sacrificing his whole fortune for the Elector and the Elector insist- 
ing on lending the Rothschilds all his cash without interest. He 
was merely planning to extend his traffic in the Wellington scrip 
and other war trade. 



Rothschild was surprised to find himself summoned a day or two 
after this purchase to the office of John Charlies Herries, Com- 
missary General. The Commissary must have been no less sur- 
prised at the squat, blunt, Frankforter, looking and talking like a 
Jewish comedian taken from a London music-hall stage. Herries 
says that at this time Rothschild was wholly unknown in London 
official circles as a capitalist. Nathan was asked why he had bought 
the gold. What did he propose to do with it? ft was the hour of 
fate for the Rothschilds. He might have lied — a course he would 
have pursued with as sweet a conscience as when he bought Buderus 
and other public officials. But he caught here a glance of the long 
turnpike of time. He told Herries why he had bought the gold — to 
buy Wellington’s bills. Herries said the government wanted the 
gold and Rothschild promptly sold it to him at a large profit. 

But how was the Commissary General going to transmit it to 
Wellington? Rothschild said afterward the government didn’t 
know. Why not use the House of Rothschild to transport it? It had 
the resources. It had branches in England and on the Continent. 
It had agents in France and Spain. It had successfully transported 
gold overland to the traders who had taken Wellington’s bills. It 
could do the same thing for the government in a way the govern- 
ment could not do for itself. The House of Rothschild was an ally, 
deeply devoted to the interests of the Elector of Hesse and to the 
Austrian Emperor, and Nathan himself was a citizen of Britain. 

Rothschild outlined to Herries how he would proceed. Herries 
reported it to the Prime Minister and the Finance Minister, who 
approved the plan heartily. And, in a trice, Nathan Rothschild, the 
unknown smuggler-banker, was established in the headquarters of 
the ministry, supervising the delicate operation of sending money 
to the irascible and clamorous Wellington. 

Just how Rothschild did this remains in some doubt. Count 
Corti, his most reliable biographer, meticulous in his citation of 
authorities, says, in this instance without giving adequate author- 
ity, that the English gold was transported across the Channel to 
France; that there the Rothschilds exchanged it for bills upon 



certain bankers and thus, through a series of operations, got the 
bills into the hands of Wellington who could exchange them for 
specie with the bankers. The defects in this plan are too obvious 
to discuss. 

But Mr. Herries says that the Rothschilds took English bills of 
exchange to Holland where they supervised the business of ex- 
changing them for French coins. These coins were then sent by an 
English warship from the port of Hellevoetsluis in Holland to 
Lisbon. It would be bold indeed to say that Herries did not know 
how it was done, since the whole business was managed from his 
office. And if it is true it gives the lie to the whole romantic story 
of the perilous journeys of the venturesome brothers over moun- 
tainous country infested by brigands and armed enemy forces. We 
find Herries writing to the Prime Minister telling him of the 
“skillfulness and zeal” with which Nathan handled the trans- 
action and how he had “already disbursed £700,000 in bills in 
Holland and Frankfort without the slightest effect upon the ex- 
change market.” 

But some gold was shipped across the Channel. Letters of James 
to Nathan intercepted by the French police revealed that some 
£120,000 had been sent to James at Paris. What is entirely prob- 
able is that the bulk of this business was done with bills but that 
some gold, perhaps a considerable amount, was shipped also. What 
the whole operation amounted to is also left to surmise. But we 
know from another source that in the year 1813 the whole amount 
of specie sent to Wellington by the British government amounted 
to £1,723,936 and 339,432 Spanish dollars. Probably the bulk of 
this was managed by Rothschild. And he doubtless was well paid 
by the British government. His pay must have been a commission 
and did not include the large profits in discounts. It was doubtless 
a generous profit, but it could not account for the immense wealth 
with which the Rothschilds appeared in Europe two years later. 

But it did account for the most important advance they had 
ever made. For they were now soundly entrenched with the British 



One incident of this operation, however, has not been sufficiently- 
emphasized. It was one of those master strokes which exhibits 
these men as capable of strategic daring of the highest order. In 
the course of these transactions, either before or after the deal with 
Herries, James, the youngest brother, was sent to Paris. Solomon 
and Carl had been working more or less out of that center. But 
doubtless Solomon was needed at Frankfort. And it seems probable 
that Nathan saw the value of establishing a branch in Paris. 

The brothers took advantage of the fact that Dalberg, primate 
of the Rhine Confederation at Frankfort, to whom they had made 
many advances for his personal account, was going to Paris upon 
the occasion of the birth of Napoleon’s son. Anselm loaned the 
venal Dalberg 80,000 gulden for the trip and got from him a pass- 
port for James and a letter of introduction to no less a person than 
Mollien, the Finance Minister of Napoleon. James went to Paris 
and called on Mollien, He informed him that his brother Nathan 
in London, as the representative of their house, was doing a large 
business in English-Continental trade and that he was shipping 
gold to France through Gravelines. This information intrigued the 
French minister, for there was nothing France desired more than 
British gold. He encouraged the young Frankforter to continue this 
trade and expressed the hope that his story was true. 

There could have been but one reason for this step. The Roths- 
childs were shipping into France gold that was going to Well- 
ington. If discovered by the police they would have to make an 
explanation. Here was an explanation. What is more, it was an 
explanation made in advance of discovery — and made directly to 
the Finance Minister himself. It was a dangerous expedient. James 
was putting himself in the hands of the French. He was trifling with 
a resolute and ruthless enemy. A false step here might have brought 
him to the block swiftly enough. It was foresight supplemented by 
action of a very audacious kind. But it was more. It was also a 
plan to get a footing in France. After all, Frankfort was in the 
hands of Napoleon. The Confederation of the Rhine was his 
satrapy. The brothers were already operating in both camps, with 



Nathan in England and the headquarters in Frankfort. Nathan 
was on terms of intimacy in the service of England; but Anselm 
was on terms of equal intimacy with Dalberg, Napoleon’s ruler of 
Frankfort, while at the same time maintaining confidential rela- 
tions with the dispossessed Elector of Hesse and seeking further 
relationships with Austria. The brothers had their feet in all camps 
and were prepared to capitalize upon any result the war produced. 
Beyond doubt these moves proceeded from the fertile imagination 
of Nathan, who was now the recognized leader of the house. 


The fourth episode revolved around the last mighty effort of 
England and her wobbly Continental allies to drive Napoleon out 
of France. The vast disaster of Russia had undermined the Em- 
peror’s strength and reputation. It was a terrible economic blow 
to France. England rallied the allies to another great exertion of 
their united resources. In January, 1813, England agreed to send 
to Prussia and Russia large grants of money. Prussia was to get 
£666,666; Russia over a million. Each was to put new large levies 
of men into the field. Later in the year Austria, under Metternich’s 
leadership, abandoned Napoleon and threw in her lot with the 
allies. England promised Metternich a million pounds. Later this 
was more than doubled. 

Herries, the English Commissary, was now charged with the 
difficult task of getting these sums to Prussia, Austria, and Russia. 
It was a delicate job. England could not send that much gold to 
the Continent out of her already depleted resources. But if she sent 
bills to her allies the effect would be disastrous on international 
exchange, particularly British exchange. 

The reader would do well to understand this. If a man in England 
wishes to send a hundred pounds to a man in Berlin, he can send 
gold. But if he does not wish to send gold he may hunt around for 
some man in England who has a hundred pounds due him from a 
man in Berlin. This first Englishman may buy from the second 



his hundred-pound claim against the man in Berlin. He may then 
send that claim to the man in Berlin to whom he owes his hundred 
pounds. That Berliner may then collect the hundred pounds from 
the Berliner who owed the bill in England. 

Thus in a city like Vienna there are always a number of mer- 
chants who have bills due to them by men in London. Bankers buy 
up or discount these claims against London merchants and sell 
them to other Viennese who want to pay bills in London. Thus 
there is always a demand in Vienna for bills due by men in England. 
And here is where the trouble begins. If the demand for the bills is 
small and the supply great, the price of these bills will drop. A man 
in Vienna who has a bill of a hundred pounds due to him from a 
Londoner may have to sell it for only ninety pounds because the 
supply of London bills is very great. 

Now if England were to send to a city like Vienna £168,000 in 
bills, added to all the other bills in Vienna due by Londoners, the 
price of these London bills would fall disastrously. That, indeed, is 
precisely what happened. The Austrian finance minister com- 
plained that he had to sell a thousand-pound bill for six hundred 
pounds. Thus, while England sent a bill for a thousand, the 
Austrian government got only six hundred. The remaining four 
hundred was absorbed by the bill brokers and bankers. 

As England had to send over many millions to Russia, Prussia, 
and Austria, she was anxious to find a way of doing this without 
depressing the price of British paper, so that her allies would receive 
a thousand pounds for every thousand-pound bill sent. To do this 
delicate job Herries again called in Nathan Rothschild. The banker 
was commissioned, first, to manipulate the foreign-bill market so 
that exchange would not be against England — that is, that English 
bills and pounds would not decline in price; and, second, that the 
money would be transmitted to her allies without loss and without 
upsetting the foreign-exchange market. 

And this job Nathan, with the aid of his brothers, did with 
great skill in the face of many difficulties. He did this partly by 
“going around” the bill market and partly by manipulating it. 



At this time a large trade was flowing between England and the 
Continent. Continental powers were buying more from England 
than they were selling. Therefore, the price of English bills on 
trade alone would have been favorable. But when to the bills due 
by England on commercial transactions were added the millions 
due by her on the subsidies she promised, the natural drift of the 
market was against English bills. 

It was the bills for the subsidies which caused the trouble. But 
all these, so far as Prussia and Russia were concerned, were deliv- 
ered to Rothschild. Thus, he had in his hands the surplus of English 
bills. Now if he could get in his hands also a large supply of the 
Continental bills, it would be possible for him to feed either English 
or Continental bills into the market as might be necessary to keep 
prices balanced. To put into his hands still further control of the 
exchange, he bought bills through his brothers and his agents 
directly from merchants in the leading European ports before 
these bills got into the regular bill market. 

In this way, controlling enough of the two streams of bills — bills 
against England and bills against Continental countries — he was 
able to protect the English pound sterling from declining. Of 
course, he had to use a large amount of his own large resources on 
the Continent to purchase Continental bills and to hold them. And 
always, of course, there would be balances in gold to be settled by 
England. But these balances never got into the channels of trade. 
They did not have to leave England always. For the Rothschilds 
could receive the gold in their English house, retaining it there, and 
paying it out from their Frankfort or Paris houses. The whole 
transaction was complicated. But it was one which, as Herries said, 
kept Rothschild “in his [Herries’] rooms constantly.” The value 
of these services was all the more apparent by contrast with the 
difficulties encountered by Austria, which persisted until the war 
was over, in negotiating these subsidy transfers through her own 
Viennese bankers, to her great loss. 

But the Rothschilds besieged the Austrian government for the 
privilege of servicing the transmission of the English subsidies. 



What they had done for the English government was quite un- 
known, the Wellington service remaining a profound secret, ac- 
cording to Herries, for twenty years. It was probably difficult for 
the Austrian officials to believe that these uncouth Jewish traders 
with their bad grammar, their harsh Yiddish, and their unlettered 
appeals could be such extraordinary financial wizards. Only one 
small transaction did they get from Austria — handling half of a 
remittance of only 9 million francs from Belgium. The Austrian 
finance minister explained that the whole amount was too large 
a sum for second-rate bankers to manage. 

A mere incident was to turn the scales in their favor. Their rising 
wealth had stimulated the jealousy of both Christian and Jewish 
rivals in Frankfort. When Napoleon returned from Elba, every 
effort was made by Austria to draft the needed men for the troops. 
At Frankfort an effort was made to force two of the Rothschild 
brothers into the army. They appealed to Nathan. Nathan appealed 
to Herries. Herries wrote the Austrian ambassador at Frankfort. 
He outlined the immense importance of the work they were doing 
for Great Britain, the great sums involved, the delicacy of the 
operations, and “the English government is most anxious that this 
firm should not be annoyed in any way.” This note was sent to the 
foreign minister. It opened his eyes. It revealed that if he did not 
know who Rothschild was, it was his loss. It broke the ice at the 
Austrian finance offices, and thereafter the Rothschilds began to 
handle the Austrian business, too. 

Their resources had become enormous. After Napoleon’s banish- 
ment Prussia was desperate for funds. Solomon Rothschild took 
£200,000 to the finance ministry himself from the British govern- 
ment. But the government said this was inadequate. On his own 
responsibility, out of the Rothschild funds, and without waiting 
for formal approval from England, Solomon handed over to the 
Austrian treasury another £150,000. Herries, of course, confirmed 
this. But this bold act and the display of large resources completely 
won the Prussian treasury. Solomon was made Commercial Adviser 
of the government. 



Then came Napoleon’s defeat and the entry of the allies into 
Paris. The Count of Provence, soon to be crowned Louis XVIII 
of France, was living in Buckinghamshire. He was broke and ap- 
plied to the English government for funds to assure his march to 
the throne in the style becoming a king. Nathan accepted the Eng- 
lish government’s draft for five million francs in England, and 
when Louis arrived in France, James handed him the money. 
While all else had been done by Nathan in the darkest secrecy, 
this act he wished to be known. What more natural? The scion of 
a score of monarchs and a thousand years went to his throne with 
the francs of the poor and crusty bill merchant of Frankfort’s Jew 
street jingling in his pockets. 

With this event the Rothschilds could boast that they were 
bankers in the service of England, France, Germany, Austria, to 
say nothing of Russia and the smaller states. The great, gleaming, 
golden road was opened before them. 


In the midst of all this Meyer Anselm, the father, had died in 
Frankfort. Long before his death the business had been literally 
swept out of his hands by his energetic sons. He had been ill for 
several years. He had drifted more and more to the comforts of 
his Talmud. He was a quiet man, amiable, wholly lacking in that 
fierce energy which drove his sons. He was stricken in the temple 
and three days later — September 19, 1812 — died at the house of 
the green shield in the Judengasse, where he had lived over his 
small shop for so many years. 

Two hoary fictions cling about that bedside. One is that his five 
sons, with their daughters and mother, gathered about while the 
dying man delivered to the boys the moral testament by which 
they lived and which is epitomized in their coat of arms — Con- 
cordia, Integritas, Industria. The other is that there he bequeathed 
to them, like an expiring emperor, the five great financial provinces 



of Europe which they ruled so long afterward — Germany, Austria, 
England, France, and Italy. 

When the old man lay dying, Nathan was in England, while 
Solomon, Carl, and James were either in Paris or the country con- 
tiguous to it, carrying on their trade in the Wellington bills. 
Anselm alone could have been there and he doubtless was. 

As for the bequest of Europe’s five provinces, Carl did not go to 
do business in Italy until many years later, neither Solomon nor 
Anselm had done any business for Germany or Austria, James was 
a mere youth acting as Nathan’s subaltern in Paris in connection 
with the English business. Nathan had built up a flourishing busi- 
ness in London, but of no great importance yet. 

When the old man was stricken on September 16 he hurriedly 
made his will. He wished to keep the business in the hands of the 
sons who had created it. And when he died and the will was opened, 
it turned out, as in the case of John D. Rockefeller and many other 
American millionaires, that he no longer owned any part of the 

In 1 8 io he had reorganized it. He had made it into a partnership 
with fifty shares. He was allotted twenty-four, Solomon and Anselm 
twelve each; Carl and James one each. Nathan was left out — 
doubtless the shares of the old Meyer included Nathan’s twelve. 

But now in his will he declared that he had sold his interest to 
his five sons for 190,000 gulden — about $76,000 — and that this 
constituted his whole estate. He left 70,000 gulden to his wife and 
the balance to his daughters. But he made it plain that after his 
death the sons were to be equal owners. He provided that the 
daughters should have no interest in the business or any right to 
see the books. He created, as Fugger did, a continuing dynasty or 
partnership, limited to those male heirs who took an active part 
in the business. And he enjoined upon all his children “unity, 
love, friendship.” After his death the headquarters of the house 
remained in Frankfort. Anselm, the eldest, became the titular head 
of the firm. 




When Napoleon was definitively liquidated at Waterloo and 
Europe settled down to peace, every country was in a state of 
economic disorganization. Every country was loaded with debt. 
Every country was more or less dislocated by the changes that 
the industrial revolution was making in its economic structure. 
Every country was desperately in need of money. 

At this moment the prestige of the Rothschilds, and particu- 
larly of Nathan in London, reached the highest point. No longer 
were they to be mere suitors for financial jobs from finance min- 
isters. These lordly gentlemen were now to court the Rothschilds. 

It is by no means clear precisely what was the chief source of 
their vast wealth. They had rendered invaluable service to the 
allies in transmitting large sums of money from one to the other. 
But they had not acted as lending bankers, though they did make 
occasional advances in the prosecution of the transmissal services. 
They were well rewarded, but it is difficult to believe that the 
reward was more than a commission and, though generous, could 
not account for the immense accumulations they turned up with 
when Napoleon went to St. Helena. They made large profits on 
the Wellington business, but that too could not have been the 
source of as large a fortune as they possessed. It is difficult to 
account for their wealth unless we conclude that the bulk of it 
was amassed in profits on war trade and the financing of war- 
trade profiteers and in speculation. 

What they were worth is difficult to say. No accurate estimate 
exists. But all their biographers, most of whom are none too 
reliable, are agreed that they were, when the war ended in 1815, 
among the richest, if not the richest, men in Europe. 

The brothers now wanted recognition. They had money; they 
needed prestige. They wanted ennoblement. And they proceeded 
to ask for their reward. They sought it from Austria, the last of 
the powers to recognize them. But just as the Rothschilds had 



groveled before these princely customers, now the ministers of 
Francis talked among themselves how they might hold the sup- 
port of the powerful bankers. They were not left in doubt. The 
Rothschilds hinted that they wanted to be barons. It was embar- 
rassing. What title could be given to these rich fellows: imperial 
and royal counselor? No, that was for eminence of another sort. 
Then let them have the prefix von before their name. But a privy 
counselor subjected this proposal to a devastating analysis. Why? 
he asked. What had these men done to command such distinc- 
tion? They had performed the tasks entrusted to them well, but 
they had been in the employ of England and England had paid 
them well, doubtless, rewarding them with money, which is what 
they worked for. They had performed the service for which they 
were employed and had been compensated for it. What more 
should a businessman ask? All the talk about their punctual, 
reliable, honest, and efficient dealings — well, these are virtues 
expected of any banker. The argument that Austria should keep 
these men satisfied and friendly seemed to the privy counselor the 
silliest of claims. These men were businessmen. They had been 
begging Austria to give them its business. That is what they lived 
by. When Austria had profitable business, they would, like all 
bankers, jump at the opportunity for profits. When the business 
was not profitable, they would not touch it. They operated for 
profit. They would serve as long as that was available. But if it 
was deemed desirable for political reasons to reward these brothers 
— why, then, give each one a gold snuffbox bearing the emperor’s 
initials in diamonds. 

The privy counselor was right. In 1822 Austria needed money 
badly. She asked the Rothschilds for a loan of 30 million gulden. 
The Rothschilds said — yes, they would lend the money, but would 
have to have the bonds at 70 per cent with interest payable in 
advance. The finance minister analyzed their offer. It meant the 
government would have to issue 42,875,000 gulden in bonds to 
get 26,796,875 in money. The interest would amount to 7 per 
cent. The bankers would make 3,215,625 gulden. The government 



discovered that Herr Solomon von Rothschild was preparing to 
rook the royal treasury. It made inquiries elsewhere and dis- 
covered that bankers who had not been honored, who owed 
nothing to the imperial throne, foreign bankers, indeed, and for 
nothing more than a mere profit, were willing to do better than 
the von Rothschilds. The von Rothschilds did not get the busi- 

But it was some years later that this proof came. In 1816 the 
privy counselor was not listened to. The emperor raised Anselm 
and Solomon to the dignity of being von Rothschilds and a week 
later conferred the same honor upon Carl and James. Nathan, 
being an English subject, was left out. But six years later — in 
1822 — after the Rothschild house had risen to undisputed emi- 
nence as the first banking house of Europe, all of the brothers 
were made barons, including Nathan. But Nathan, to his dying 
day, never used the title. 


It was at this point — when the war ended — that the Rothschilds 
moved into the upper altitudes of international banking in its most 
important sense, the issuance of government securities. 

They had been bankers. They did a large bill-brokerage busi- 
ness. They speculated in bills. They made loans to all sorts of 
people. They handled a few small public loans for Denmark and 
some cities. They handled the funds of the Elector of Hesse- 
Cassel. They made great sums transmitting money for the great 
powers. But they had been rigidly excluded from the upper alti- 
tudes of banking, where the aristocrats of money reigned — the 
flotation of loans for governments. Their great wealth had been 
made in smuggling, in war trade, in financing war trade of 
merchants, in war bills, and in speculation in government securi- 

Highly colored journalistic accounts of Nathan standing at his 
favorite pillar of the London Exchange, potbellied, somber, taci- 



turn, inscrutable, sending the market up and down with his smiles 
and his frowns have been greatly overdramatized. The London 
Exchange was a market place for securities, but chiefly for gov- 
ernment securities. Only a few corporate stocks were listed — 
those of the large trading companies. Government paper fluctu- 
ated violently at times during those troubled years and it was in 
this that speculation took place. Nathan carried on extensive 
operations on the floor in government paper and it is not at all 
improbable that the greater part of his fortune was made this way 
up to 1814. The art of manipulation had already been developed. 
The subtler and more delicate nuances of fraud for which ex- 
changes are noted were well understood. These were not born with 
Daniel Drew and Jim Keane. Abraham Goldschmidt, “King of 
the Stock Exchange,” could plant a false scrap of news, let out 
a flock of fake rumors and tips, jiggle an issue as neatly as the 
gentlemen who sent Radio and American Can and Case Corpora- 
tion bounding up and down in 1929. 

Nathan Rothschild came to be known as one of the most daring 
and successful speculators of his time. With his brothers on the 
Continent and his agents everywhere he was able to collect inside 
information and to transmit it swiftly, as Jacob Fugger had done 
three hundred years before. There is a legend that exalts and 
debases Nathan Rothschild; one that admirers who love pro- 
ficiency in slickness have loved to repeat but which, fortunately 
for his fame, is not true. It is the story of how he stood on one 
hill in Belgium while Napoleon stood on another, the Emperor l 
directing the Battle of Waterloo, the banker watching the tide of : 
fortune, and how, when Napoleon’s defeat was imminent, Roths- ! 
child fled from his high perch, made for the coast with relays of 
swift horses, set out in a chartered boat at night, and reached 
the Exchange next morning in time for the opening and before 
news of Wellington’s victory was known. There the brokers saw 
him by his familiar pillar, simulating dejection, selling consols. 
Knowing his facilities for inside news, his action precipitated a 
panic and a wave of selling, while through his agents he gathered 



in all the government paper that was offered, making a fresh 

The story, of course, is not true. A mere glance at the dates 
and time and distances involved reveals that the feat was physi- 
cally impossible. The Exchange had the news when it opened for 
business. Nathan did indeed get the news of the victory an hour 
before the government and he had the satisfaction of sending to 
the ministry the first word of the great event. That is all. 

After the war, the history of the firm became the story of a 
large and ever-growing international banking house with branches 
in five countries, richer, more powerful than others, but following 
the pattern of banking as it had been developing for three hun- 
dred years. 

Anselm, the oldest brother, remained in Frankfort. A fine 
banking house there was the firm’s headquarters. He himself 
managed the business of the firm with Prussia and Germany. But 
Frankfort became an unpleasant haunt for the Rothschilds for a 
while. The hot breath of hatred was on the poor Jewish family 
that had risen to such wealth. Napoleon brought to Frankfort at 
least one thing — legal equality for the Jews. This they bought 
from Dalberg, Napoleon’s venal ruler in the city. The old Jew 
street remained, but those only lived there who wished to. The 
elder Meyer remained until his death. Guetele, his widow, con- 
tinued there until her death many years later. The sons had made 
their homes and their business headquarters outside that old 
prison street. But now Dalberg was gone. The Germans were 
again in possession. They refused to ratify the liberal dispensa- 
tions of Napoleon. The Senate actually considered measures to 
force all Jews back into the ghetto. This would include the Roths- 
childs with all their millions and power. 

At this point Anselm and his brother Solomon considered 
emigration. They would go elsewhere. This was a serious matter 
for Frankfort. Anselm spent 150,000 gulden a year upon his 
home. He dispensed 20,000 gulden in charities to all sorts of 
people. A procession of rich and eminent persons filed daily into 



Frankfort, seeking favors at the hands of the great banker, and 
spent money in the city. It would not do to lose so profitable a 
citizen. Accordingly, the family put pressure upon Metternich to 
force the Frankfort Senate to remove the Jewish disabilities. And 
in 1819 this was done, after a fashion. The ghetto was abolished 
but the Jew could own but a single piece of property. The race 
was limited to fifteen marriages a year. They were classified as 
citizens but as “Israelitish citizens” — a special subclass of citizen 
less favored than other Frankforters. But it was a great gain, 
even though in a very small area — Frankfort — and the Roths- 
childs were responsible for it. They used their power at court and 
their money. They kept the palm of Friedrich von Gentz, the 
commercialized publicist-secretary of Metternich, well greased;, 
they loaned Metternich himself 900,000 gulden. 

Solomon Rothschild found it necessary, because of the growing 
business with the Austrian court, to establish a house in Vienna. 
But Vienna was not free to the Jew. He therefore took quarters 
in the Empire Hotel. When the freedom of the city was given him 
in due course he took over the whole hotel and the adjoining 
building as the Rothschild home and banking house. After Aix- 
la-Chapelle in 1818 he became the chief banker of the Austrian 
government. Metternich wrote of him as “my friend Rothschild.” 
Metternich, the archangel of legitimacy, and Solomon Rothschild, 
the embodiment of upstartery, became fast allies for legitimacy, 
and wherever the great Austrian champion of absolutism went 
with his documents and his troops, the indispensable gulden of 
Solomon Rothschild flowed along to nourish the project. Somehow 
it got about that the fortunes of Austria and of the House of 
Rothschild were inextricably intertwined. Bethmann, his great 
rival banker, now completely overshadowed, said in 1822 that the 
continued prosperity of the Rothschilds was necessary to Austria. 

James Rothschild, the youngest brother, who had gone to Paris 
when the affair of the Wellington bills was being managed, re- 
mained there, flourishing, after the best Rothschild manner. After 
the Bourbons returned to power he forged rapidly forward to 



become one of the first bankers of France. He moved from his 
modest flat and took over the palace of Fouche, Napoleon’s chief 
of police. He filled it with treasures of art, costly furnishings, and 
plate, and became a sort of patron of men of letters. He enter- 
tained lavishly and made loans with great discretion to many 
leaders and statesmen. He established the closest relations with 
Louis XVIII and Charles X, his successor. But when Polignac 
staged his ill-fated coup d’itat for Charles and Parisians rushed 
to their beloved barricades to drive Charles from his throne and 
put Louis Philippe there in his stead, James Rothschild could 
look with satisfaction upon a new king whose investments he 
managed, to whom he loaned money, and with whom he had dealt 
on terms of the greatest intimacy. Thus James in Paris could fall 
upon his feet with the alleged liberal revolution of Louis Philippe 
while Solomon in Vienna held the pursestrings of the most im- 
placable foe of liberalism. And though France had her great 
bankers — Laffitte and Casimir Perier, Delessert, Mallet, Hot- 
tinguer, and Ouvrard — the House of Rothschild rose above them 

The state to which these men had arrived may be sensed from 
the following account of James by the poet Heine. “I like best to 
visit him at his office in the bank, where, as a philosopher, I can 
observe how people — not only God’s people but all others — bow 
and scrape before him. It is a contortion of the spine which the 
finest acrobat would find it difficult to imitate. I saw men double 
as if they had touched a Voltaic battery when they approached 
him. Many are overcome with awe at the door of his office as 
Moses once was on Mount Horeb when he discovered he was on 
holy ground.” 

This was the man who as a boy was taught in Frankfort that 
he must step off the sidewalk and bow when a Christian ap- 

A revolt in Naples was the occasion of the establishment of the 
last of the Rothschild houses. The people of Naples and Sicily 
revolted against Ferdinand I, the King who had been restored 



to his throne when Napoleon’s Murat had been driven away. 
They wanted a constitution. Ferdinand, under pressure, yielded. 
But Metternich promptly summoned a congress of monarchs at 
Leibach and got for Austria a commission to deal with Naples. 
Metternich sent an army of 40,000 men. But an army costs 
money, and Solomon Rothschild was asked to supply it. He did — 
first sixteen million and then much more. And Carl Rothschild 
was sent to Naples to act as financial adviser of the Neapolitan 
king. For four years Metternich’s soldiers remained quartered on 
the people of Naples, at their expense. Carl paid the bills, taking 
the bonds of the Neapolitan state. And there in Naples he re- 
mained, setting up the fifth of the Rothschild financial colonies. 
Thus this extraordinary family, in a space of a score of years, 
rose from the estate of a small firm of bill brokers and traders to 
be the most powerful financial institution in the world, with Eng- 
land, France, Germany, Austria, and Italy as its provinces. 


The first phase of this adventure in money getting had been, as 
we have said, like the progress of the chess player, an accumula- 
tion of small advantages. The next was a sudden flight upward to 
great wealth by processes and methods that were not quite open 
to those lordly bankers who had accumulated constricting digni- 
ties along with their money. The third phase was the emergence 
into the realm of public-security banking, where the profits were 
magnificent. The final phase was dynastic. 

There is no point in recounting all the national loans in which 
the Rothschilds figured as Europe, which had borrowed herself 
into disaster by war, now tried to borrow herself out. It was a 
paradise for the bankers, and the Rothschilds found themselves 
handling the largest loans either singly or with others for England, 
France, Austria, Prussia, Russia, Italy, and the smaller states. 
And here they were able to sink their arms into those rich pools 
of invisible profits which are the source of most vast fortunes. 



The banker got a commission for floating a loan. But this made 
but a part and frequently a small part of his rewards. He under- 
wrote a state bond issue, taking over at 60 bonds with a face 
value of ioo. Having taken the issue and handed the money to 
the state, he then proceeded to boost the price on the bourse by 
the well-known methods of manipulation which the stockbroker 
and banker of today still insist are essential to his trade. It was 
not possible for him to hang on to the whole issue, but he usually 
kept as large a block for himself as his resources and expectations 

The Rothschilds were in some cases able to drive issues up to 
par before they unloaded their own holdings. The modern Ameri- 
can and English banker does the same with corporate shares. In 
the financial world the banker, the broker, the institution organized 
to perform some function gets paid, as a rule, some modest and 
justifiable compensation for that service; but behind the scenes 
and out of sight there are that collection of slanted, semidark, 
questionable devices for making huge profits, which give to 
finance too often the character and ethics, if not the external 
appearance, of the racket. Out of all these things the firm of Roths- 
child was now prospering amazingly. Bethmann, the Frankfort 
banker, said that he had it on reliable authority that the five 
brothers were making six million gulden a year. In another decade 
they were far outstripping that. 

One secret of their enormous power in their several national 
dependencies was that, unlike the modern American banker at 
least, their clients were governments rather than corporations — 
kings and emperors rather than board chairmen. The govern- 
ments of Europe had gone in on a large scale for borrowing. This 
was not new. It was merely that war had become more expensive. 
And thus the governments of Europe fell into the hands of the 
bankers as the railroads and utilities of America have done in 
our time. The bankers cultivated ministers, bribed them and their 
agents, baldly as they did Gentz, more subtly by loans as they did 
Metternich. They entertained them, showered gifts upon their 



wives, as the Bardi and Peruzzi did three hundred years before. 
Also they found it necessary to penetrate government departments, 
as they did when they took Buderus into partnership, and as one 
of our great American banking houses has done for decades, with 
its members, its lawyers, its employees holding positions of im- 
portance and trust in the state and finance departments of the 
government, while recruiting its partners from men of power and 
influence in the administration of all parties. The ethics of the 
city party gangs, perfumed and rigged out in a frock coat and 
sprayed with the odors of sanctity, have characterized the public 
morals of investment bankers the world over. 

But the Rothschilds beyond all question had that kind of intui- 
tive feeling for money, for risks, for the chances that rise out of 
the elusive and generally unpredictable behavior of men that 
amounts to genius. At least one of them had it and the others 
were men of large talents in this one area of human activity. 
The record of their performances attests this. In the very diffi- 
cult years preceding the panic of 182 5 — 1823 to 1825 — the Baring 
house made two loans, both of which defaulted. The Goldschmidts 
made three and the Ricardos one, all of which defaulted, while 
the Rothschilds made eight large international loans, all of which 
stood up. Out of twenty-six flotations by leading English bankers 
in those years, only ten escaped default, and eight of these were 
made by the Rothschild house. 

But the Rothschilds until late in their careers apparently took 
little or no part in the creation of wealth in any country in which 
they operated. In those years from 1790 to 1825, the most amazing 
change in the processes of producing goods was taking place — 
that industrial revolution which set the modern world off upon 
the machine age and changed its manners, its habits, its tastes, 
its governments. The revolution in the methods of producing tex- 
tiles, wools, the introduction of steam, of railroads, of steam 
shipping, and a host of other technological developments came 
about rapidly. But the Rothschilds, so far as the records reveal, 
took no interest or part in this until all the spadework had been 



done. They did not finance industry. Indeed, few of the bankers 
did. And, above all, they stood aloof from corporate finance, which 
seemed to belong to a level below their lordly attention. Indeed 
Baring in the House of Commons denounced the growing flood 
of corporate stocks that was flooding the market, though it was 
quite small. In fact twenty years later, in the early ’forties, out 
of £1,118,000,000 of securities listed on the London Exchange, 
£894,000,000 were government issues and £46,800,000 were bank 

In later years, however, they did turn to industrial and com- 
mercial ventures, particularly as their vast resources increased 
and, as the result of industrial development, great opportunities 
appeared, involving less risk than in the earlier years of the new 
era — and when they saw the value of doing with corporate stocks 
what they had done with bonds, underwrite them, boost the price 
on the exchange, and unload at large invisible profits. Also they 
were drawn into certain large-scale private and semiprivate enter- 
prises by reason of their close alliance with their respective gov- 
ernments. In England, Nathan’s son Lionel, after Nathan’s death, 
financed the purchase of the Suez Canal for England and backed 
the adventures in empire building of Cecil Rhodes. The French 
house came to the rescue of the Czar several times, on one occasion 
getting from him the important Baku oil concession that put the 
Rothschilds into competition with John D. Rockefeller until they 
sold out to Dutch Shell. 

In France, James financed and built the Chemin du Nord, 
became its president, and it has remained in the family among 
its important possessions to this day. Later, in 1870, James’ son 
Alphonse financed the transfer of the huge 5,000,000-franc indem- 
nity of France to Germany. 

In Austria Solomon did some not-too-successful railroad financ- 
ing. He organized the Credit Anstalt, Austria’s greatest bank until 
its disastrous collapse in 1931, and continued as the chief Aus- 
trian banker until his death. 

Nathan died in 1836, leaving his son Lionel in command. 



James lived until 1868. Solomon died in 1826; Carl and Anselm 
in 1855. James’ son Alphonse assumed the leadership of the power- 
ful French house. Anselm left no sons, and the house, managed 
by two nephews for a few years, gradually passed out of exist- 
ence. Carl, in Naples, left his son Albert in control. But Naples 
was too troublous a spot. Italy was too much in ferment for suc- 
cessful banking under a banker who had little or no interest in 
his business. And so the Neapolitan house was closed. Gradually 
the Austrian branch sank into a place of unimportance. The 
French house became a mere investment trust for the extensive 
invested wealth of the family. The old banking house of Nathan 
in St. Swithin’s Lane remained, active and influential, but far 
from first among London bankers. Today, Rothschilds do not con- 
trol any of London’s five big banks — the Midland, Barclay’s, 
Lloyds, National Provincial, or Westminster. No Rothschild is 
on the directorate of the Bank of England, but Nathan’s old 
enemy Baring is there. 

Fortune magazine said a few years ago that there were then 
living thirty-seven persons of the Rothschild name. They are 
strangely different from those tough-fibered old gulden chasers of 
the Frankfort ghetto. A hundred years of wealth have softened 
some, mellowed some, vivified some. But the original energy is 
gone. The energy of those able three brothers, Nathan, James, 
and Solomon, has been succeeded now by the energy of mere 
money. There is no money-making energy like money itself. That 
vast bolus of wealth which two generations piled up is now en- 
dowed, through sheer investment, with more money-making 
power than the famed brothers possessed. The family is richer 
now than it was under them, but it is far from being as powerful. 
The Rothschild family is now just a bankroll. 

It is difficult to leave these men without, like a symphonist, 
strumming for a few bars on one of the minor motifs of this 
piece. It has to do with the hardihood of the legends that have 
clustered about the Rothschild name. Nowhere is this better illus- 
trated than in a single paragraph that appeared in one of our lead- 



ing magazines several years ago. It represents in a nutshell the 
batch of fairy tales that three generations have had repeated to 
them over and over about the Rothschilds: 

It was their guess about Napoleon that set them on their unique pedes- 
tal. The five brothers were clever enough to realize that for all his genius, 
for all his victories, Napoleon could not last. On that intuition they 
staked every penny. Nathan’s fabled advance news of the Battle of 
Waterloo gave the Rothschilds an opportunity to buy depressed securi- 
ties in London. Even without that coup the day after Waterloo was to 
find all the established governments of Europe deeply in their debt. . . . 
They, especially Solomon Rothschild, guessed right about railroads, 
became the railroad builders of Europe. While Calvinist clergymen thun- 
dered against the steam engine and country squires complained that the 
filthy little teakettles on wheels were ruining the countryside, the Roths- 
childs and their sons were pouring out gold to lay tracks. 

It would be difficult to find anywhere in history so many insup- 
portable statements packed into so few sentences. Literally every 
statement is wrong. Yet the writer can hardly be censured since 
he was repeating what is to be found in innumerable biographies, 
histories, and essays, having their origin at least in part in the 
industry of inspired writers beginning with Gentz. 

The Rothschilds did not realize that Napoleon could not last 
and did not stake their all on this conviction. On the contrary, 
they took excellent care to protect themselves against any eventu- 
ality. Nathan in England worked with the English ministry, but 
Anselm and Solomon in Frankfort worked on equally friendly 
terms with Napoleon’s rulers in Germany. They loaned nothing 
to the English government. They did make loans to Dalberg, 
head of Napoleon’s Confederation of the Rhine, both personally 
and to his state. James went to Paris where, while operating in 
collusion with Nathan, he maintained the friendliest relations 
with Count Mollien, Napoleon’s finance minister, and established 
an excellent reputation as a banker. Nathan, in London, observed 
the greatest caution in keeping under cover so that his activities 
would not injure his brothers on the Continent. They played the 



game safe and were in a position to capitalize on victory for either 
side. It was not until after the disaster at Leipzig and when Napo- 
leon’s star was definitely setting and all Europe was betting against 
him that the Rothschilds became openly opposed. 

Of course the story of Nathan’s Waterloo coup is pure fiction. 
And equally fictitious is the statement that the day after Waterloo 
found all the governments of Europe deeply in debt to the Roths- 
childs. No government owed them anything, unless perhaps the 
small government of Denmark, which is doubtful. Up to the 
defeat of Napoleon they played no part in the flotation of loans 
by European states. Had Napoleon routed Wellington at Waterloo, 
the Rothschilds would have lost nothing, save some good clients. 
Then follows the statement that they became the railroad build- 
ers of Europe. They built a single railroad — the Chemin du Nord 
in France. And this they built not when country squires were 
complaining that the filthy little teakettles ruined the country- 
side, but after most European railroads had been built and devel- 
oped (there were at least seventy-five roads in England alone) 
by other men and the little teakettle locomotives had disappeared. 
There is a curious consistency in naming Solomon “especially” as 
the railroad builder. This fable is hoary with age. He built no road. 
He did finance in part a single road in Austria which had so 
unhappy a history that he quickly got out of it. James was the 
only one who built a railroad. 

Interlogue One 



The temptation to include in this volume whole chapters about 
three men was not easy to resist. They were Cosimo de’ Medici, 
Sir Thomas Gresham, and Jacques Coeur. The essentials in the 
stories of these men were quite the same. They were the chief 
pioneers in organizing the forms of the new capitalist system in 
Italy, England, and France, respectively. They seemed, however, 
interesting and romantic in their personal histories, but less sig- 
nificant than Jacob Fugger, and it was not possible to include more 
than one. 

When we speak of the Medici we may choose one of three — 
Giovanni di Bicci, surnamed the Friend of the People, or Cosimo, 
his son, called Pater Patriae, or Cosimo’s grandson Lorenzo, known 
as the Magnificent. Giovanni laid the foundation of the fortune. 
Cosimo, however, ablest of the three, accumulated that vast 
wealth that gave the Medici their power in Florence. Lorenzo 
advertised, paraded, luxuriated in that fortune and laid the foun- 
dation for its ruin. All of them were merchants, moneylenders, 
bankers, manufacturers. Cosimo, however, added to the techniques 
of these professions the role of politician and the devices of homi- 
cide. One does not use these brutal terms about such splendid 
persons. Yet if truth is to be served we must describe Cosimo and 
Lorenzo as bankers, merchants, manufacturers, statesmen, and 

Giovanni actually established a large business with branches all 
over Italy, in the Levant, Constantinople, and other cities. He 




opposed the Albizzi, rulers of Florence, and was hailed by the 
people as their leader. The Medici remained continuously heads 
of what is called a republic for four generations — from 1434 to 
1494 — sixty years in which the republic ripened into a thorough 

Cosimo, shrewd, iron-willed, looking the esthete, gracious but 
cruel, refused office and ruled Florence as the invisible power 
functioning behind some nominated tool, as Dick Croker or Charlie 
Murphy did, save that they ruled a vast city and he a small one of 
70,000 souls. He dressed in simple robes, sometimes like a poor 
guildsman, shrank from notice like Rockefeller, whom he re- 
sembled in some respects, whereas his grandson Lorenzo resembled 
J. Pierpont Morgan. He mingled the virtues of the chalice and the 
dagger. The problems of competition that have continued to torture 
industrial barons, he met with the singularly effective application 
of the knife. Persons of power who were in his way in the state or 
the market place were driven out of Florence; the less fortunate 
were murdered. An important source of his business growth was 
the finances of the popes. The Medici became papal bankers. The 
possession of these large funds served him as the possession of the 
funds of the emperor served the Mitsuis in Japan. 

A devout Christian, Cosimo fraternized with the Franciscans 
whom he presented with a monastery, providing it with a cell to 
which he himself retired at intervals for meditation and prayer. 
When he was seventy-five he went to his last rest with the perfect 
tranquillity of the righteous man, not at all ruffled by the memory 
of his climb to wealth and power. His son Piero, surnamed the 
Gouty, succeeded him, and died after a futile career of five years. 
Into his shoes stepped Lorenzo, who proceeded to lavish upon 
Florence the wealth his grandfather had amassed. 

Lorenzo made money, of course, for he possessed a great fortune, 
a great money-making machine, and enormous prestige. From 
Pope Paul II he got a monopoly of the alum recently discovered 
in the hills around Volterra, his Holiness justly protecting the 
monopoly by proclaiming excommunication against anyone who 



competed by importing alum from the Turks. Thus excommunica- 
tion was added to assassination as a defense against competition. 
Lorenzo was a good Catholic, but a better moneylender. He loaned 
Pope Innocent VIII 100,000 ducats for a year, taking as surety 
two tenths of the stipends of all newly appointed priests, and 
possession of the Citta di Castello until paid. The Pope made 
Lorenzo’s fourteen-year-old son a cardinal and gave to Lorenzo’s 
daughter his own illegitimate son in marriage. 

An attempt upon Lorenzo’s life was made by two priests during 
Mass, instigated by Pope Sixtus IV and the Pazzi, bankers. 
Lorenzo’s vengeance was swift. Certain of the Pazzi were hanged, 
others butchered in the streets, some cast into the Arno. He became 
an unrestrained tyrant, filled Florence with spies, was himself 
excommunicated by the Pope. He showered gold and favors upon 
painters, sculptors, poets, philosophers, enriched Florence with 
their works, bought rare manuscripts, books, antiquities, covered 
himself with the praise-giving of these subsidized flatterers, and, 
dying, left his city upon the brink of ruin. His son Pietro ruled 
disastrously for two years and was driven out of Florence to make 
way for the theocratic Fascism of the monkish enemy of bankers, 
national and international, Savonarola. 



The great businessman of England in the dawn of capitalism was 
Sir Thomas Gresham, financial adviser to three Tudor monarchs 
— Edward VI, Mary, and Elizabeth — founder of the Royal Ex- 
change and reputed discoverer of Gresham’s Law, known to every 
crossroads store controversialist on money. 

Son of a baronet who was a friend of Wolsey, born in 1519, 
when Fugger was at the peak of his career, merchant-adventurer 
by inheritance, studied at Cambridge — Thomas Gresham was the 



prototype of the modern Peel-Hanna-Chamberlain-Mellon school 
of merchant-banker-statesman. Starting with an education amid 
members of the mercers’ guild, who had but little, he spent twenty 
years as merchant and king’s factor in Antwerp, money metropolis 
of Europe, where he learned more about money, credit, exchange, 
and speculation than any of his English contemporaries. 

He went to Antwerp as king’s agent in 1551 when Edward Vi’s 
ministers were looking ruefully down that bottomless hole known 
as the national debt. It was an external debt — more kings have 
fallen by it than by guns. English kings borrowed from Flemish, 
German, and Italian bankers. More money flowed out in usurious 
interest than flowed in in loans. Edward VI had to find 40,000 
pounds a year for interest to foreign bankers. “How can the king 
be rid of his debt?” asked the ministers. Gresham’s answer was an 
amazing one. “By paying them and incurring no new ones.” Seem- 
ingly it had occurred to no one. It was the hard way. Politicians 
have a preference for the easy way — the primrose path down which 
they lead people to the ever-lasting bonfire. Gresham persuaded 
the ministers of Edward, Mary, and Elizabeth to try the hard way. 
It led to riches for England. 

By skillful manipulation on the Antwerp bourse he got control 
of pound exchange over a considerable period, making it favorable 
to London. He induced the government to economize and to remit 
to him weekly sums for extinguishing the debt. 

He had observed in Antwerp and Amsterdam that the worn 
and inferior coins drove out the good ones. England’s slipshod 
coinage resulted in the continuous flight of the sound ones and of 
the precious metals. Gresham supposed he discovered this law. 
As late as 1857 H. D. Macleod, economist, supposed so, too. He 
gave it the name of Gresham’s Law. It is probably the best known 
of economic principles. But actually Gresham did not discover it. 
It had been observed by others before him — Copernicus for one. 
To Elizabeth he said: “And it please your majestie to restore this 
your realm into such estate as heretofore it hat bene, your highness 
hath none other ways, butt, when time and opportunyty serveth, 



to bringe your base money into fine, of xi ounces fine. And so 
gowlde.” This was done. 

He perceived that foreign interest payments drained away Eng- 
land’s metal money. Why not borrow from Englishmen at home? 
There was the canon law against it. But off in Augsburg Jacob 
Fugger and his personal philosopher Peutinger had already argued 
the ecclesiastical and secular validity out of that old Aquinian 
fetish. And so Gresham got Elizabeth to end the ban on interest in 
England. She fixed the legal rate at ten per cent. 

Buying abroad and selling too little also took away England’s 
precious metals. Gresham contrived to shift the base of England’s 
trade from Antwerp to the free port of Hamburg. From thence he 
built a large trade into Germany. The Hanseatic merchants had 
had almost a monopoly of that. Gresham took away their hold 
upon England’s export trade to Germany. Thus he weakened the 
Hanse merchants and drove the Steelyard out of London. Almost 
as important, he taught England a lesson. Wars are made, not 
merely with arms, but with economic weapons. But he did not 
neglect the value of weapons. In his role of adviser he taught 
Queen Bess that a navy was a thing of great value to England and 
proceeded to supply her with one in his role of merchant. 

Lastly, Sir Thomas Gresham — knighted for his services — built 
out of his own funds the Royal Exchange to provide London mer- 
chants with a bourse such as he had seen in Antwerp. In 1571 the 
fine building was formally dedicated by the Queen, after dinner at 
Gresham’s home. 

Serious, severe, sober in his dress, he lived well, but not osten- 
tatiously as did Fugger and the Medici. He had a home in Bishop- 
gate Street and several in the country. He endowed a college — 
Gresham College — an almshouse in Broadstreet, and distributed 
alms to five prisons and four hospitals each quarter. He attained to 
no such wealth as Fugger or Medici. Moreover, he came on the 
scene after them and when the devices of the new flowering capi- 
talist and mercantilist world had been much advanced. But he 
■must rank as one of the great commercial figures of that era. 





The great business leader has been called in order Magnate, 
King, Baron, and now Tycoon. The first title of adulation conferred 
upon him was prince. Hence Jacques Coeur was called the Mer- 
chant Prince of the Middle Ages. He was in but not of the Middle 
Ages. The smell of money was in the air in France. Men who had 
the feel of livres as some men have the feel of cards or dice were 
fingering livres and breeding them. They were not operating in 
accordance with the dying techniques of the Middle Ages but 
rather of the emerging capitalist world. Jacques Coeur was doing 
this in France, as Fugger was in Germany, Gresham in England, 
and the Medici in Italy. And, though there were no schools of 
business or professors of banking institutes, these gentlemen did 
very well. Most of them — Coeur, Fugger, Law, Rothschild, Rocke- 
feller, Morgan — were already rich before the average young busi- 
ness-college graduate has emerged with his M.A. 

Coeur was pre-eminently a trader — a merchant-adventurer. He 
flourished upon the swiftly growing intercourse between nations, 
the wider variety of products upon the market, and the means of 
gratifying the taste for them by means of money. 

He was born in Bourges about 1400, the son of a prosperous 
small merchant, got some education — enough to get the tonsure 
of the clerk when he was past twenty — married the daughter of 
the Provost of Bourges, and turns up in the money-coining business 
about the time the Maid of Orleans was winning her battles for 
Charles VII. 

Coining money was the king’s prerogative in France, but he let 
it out upon a partnership basis to various argentiers in different 
sections. Ravent Ladenois had it for Bourges and a brace of cities. 



And Ladenois found for himself a partner in each such town to 
operate the mint. Young Jacques Coeur was Ladenois’ partner in 
Bourges. Ladenois and Coeur were arrested and thrown into jail 
on the charge of cheapening the king’s money — that is, short- 
weighting the coins, pocketing the difference as profit. Unhappy 
M. Ladenois whimpered that so great had been the exactions of 
the king out of the business that this was quite necessary for him 
to make a profit. Young Master Coeur said he did as he was told. 
Both were convicted, fined 1000 livres each, the plea of necessity 
weighing heavily with the judges. 

Coeur became a merchant. He turned up next as a merchant- 
adventurer. Shipwrecked in his vessel on a trip to the Orient, cap- 
tured by pirates, he escaped, drove forward in business, became 
rich, and finally landed on both feet in the very palace of the king 
as Lord Steward of the household. He continued to expand his 
business and, we are told, spread his agents to all the important 
ports of the world. He had three hundred factors, his business in 
Bourges housed in thirty buildings, with several business buildings 
in towns like Tours, Marseilles, Lyons. He built a famous palace — 
Jacques Coeur House — in Bourges, surpassing any royal home in 
France. It still stands, a castle in splendor and beauty worthy of 
a twentieth-century economic grandee, filled with tapestries, paint- 
ings, gold and silver plate, and other works of art. 

He received a patent of ennoblement from Charles VII, lived at 
court the equal of the greatest, had his son made archbishop of 
Bourges, and built his estates all over France. He went to Rome, 
one of the leaders of a great embassy, carted thither in eleven of 
his own ships, commanded by himself, pausing at Finale to deliver 
arms to the French and then going in to the Vatican to open the 
eyes of the Romans to the splendor of the ambassadors and their 
entourage, cantering in rich costumes to the court of Pope Nicholas 
V. When the king renewed the Hundred Years’ War, Jacques Coeur 
advanced him 2,500,000 francs in metal money, though he had 
to borrow some of it. 

Then, as ever, the love of the king for Jacques cooled. Almost 



out of a clear sky he was arrested in July 31, 1451, thrown into a 
dungeon of the palace, and charged with the poisoning of Agnes 
Sorel, the king’s mistress, and some ten other crimes. Chief of them 
was that he had “sent coats of arms to the Saracen by means of 
which the Sultan had gained a victory over the Christian armies.” 

There was the odor of conspiracy in all this — charges coined to 
ruin Coeur. After all, there was a vast estate which was subject to 
confiscation by the crown. And there was probably some serious 
rift between Coeur and the king because of the quarrel between 
Charles and his exiled son, who would become Louis XI. And 
Coeur was suspected of being friendly to the Dauphin. The charge 
of poisoning was dropped. But Coeur was convicted on four of the 
remaining ten counts, including the arming of the Turks, despite 
his claim that he had a license from the Pope to ship the arms. 
Coeur sold the arms to the Sultan in order to get permission from 
him to bring out of Alexandria a large cargo of pepper. 

His life was spared but his property was confiscated and sold 
at auction, the administration of the estate constituting probably 
the biggest receivership in the history of France to that time. Coeur 
ultimately escaped, went to Rome where he was received with 
honors by Nicholas V, who officially proclaimed his innocence. In 
1456 he went with an expedition against the Mohammedans, was 
taken ill, died on the island of Chios, and was buried with honor 
in the chapel of the Cordelliers in 1464. 




It is interesting to note, that in the very dawn of civilization, in 
ancient Egypt, when men were just beginning to learn the difficult 
business of living together, the art of make-up was much in use 
by the monarch and the ruling groups that surrounded him. 


It is also worth noting that this, the oldest of the luxury indus- 
tries, is the one that has persisted and grown so extensively that in 
our age it becomes at once a prop of our economic life and the chief 
weapon of our ruling figures for continuing their dominion over the 
minds of men. 

The world is now and has always been ruled by men of wealth, 
and the most important instruments in the stratagems by which this 
is achieved are the rouge pot, the haberdasher, the builders and dec- 
orators, the dramatist and the showman, and, as we shall presently 
see, that oldest of functionaries — the shirt stuffer. 

Plato’s sovereignty of the philosopher will never come until the 
philosopher puts aside the humility of the scholar and assumes the 
air of the conqueror, arranges the necessary pageantry, hires pub- 
licity men, and proceeds to sell himself to his fellows, in which very 
moment he will cease to be a philosopher. 

This is the trick the ruler and the rich man knew when we dis- 
cover the first traces of him in the ancient monuments and which, 
doubtless, he brought with him out of the jungle. 


We are all bank notes, observes Thomas Carlyle, representing 
gold. But alas ! he laments, many of us are forgeries. On this point, 
however, he consoles himself with the thought that, after all, men, 
in all times, especially in earnest times, have a talent for detecting 
quacks and, indeed, for detesting quacks. 

The sour old Scotch philosopher, who believed in the authenticity 
of heroes and the necessity for them, had a theory to which this 
reliance on man’s perception in detecting quacks was essential. 
Woe to the times, he said, which, calling loudly for its great man, 
finds him not there. 

Carlyle overstates the disaster. The times, in all ages, have had 
a way of inventing their great men. The machinery and means of 
producing men and women to our taste — and great ones, too — have 
always been ready to hand. We have always been equipped to make 



beautiful women, to hold back the wrinkles of age, to banish the 
silver threads from among the gold, to simulate youth and love- 
liness. But also we have been able to simulate intelligence and 
power, to make great scientists out of little pill mixers, to trans- 
mogrify bewildered little businessmen into great captains, and to 
inflate to the proportions of statesmen the meanest little spirits in 
our towns. 

Somehow the hero worship that flourished in the ancient world 
still persists, despite education and newspapers and books. We have 
had a gargantuan spree of debunking, of stripping the wrappings 
and labels from our spurious miracle men, our pyramid builders, 
our treasure hunters and statesmen. We have seen a good many of 
the bank notes go to protest and — to mix the metaphor — to jail. But 
the equipment for turning out fresh forgeries seems to be inex- 

These deceptions are achieved through that same more or less 
harmless theatricality by which men and women mitigate the er- 
rors of nature. No doubt originally devised to add to grace and 
charm, it has been cultivated extensively to give to cheapness and 
fraud the aspect of quality and authority and even greatness. 


Civilization, as it moves slowly away from primitive barbarism, 
seeks to dress itself up for the part it would like to play. 

This art of make-up probably was cultivated by remote tribes 
fifteen to twenty thousand years before it appeared on the banks 
of the Nile. And as it was one of the most important industries in 
the wealthiest of early nations — Egypt — so it continues to flourish 
as one of the most important of the great industries in the wealthiest 
of modern nations. It is doubtful if any single industry can match it 
in the number of persons employed and the sums expended in the 
vast business of dressing and beautifying the American man and 

Along the Nile and the Red Sea and across the Arabian Desert 


boats and camels transported the materials for ministering to Egyp- 
tian vanity, and this constituted the bulk of that country’s trade. 
Today in America it is said the American woman’s cosmetic bill 
is two billions a year. This is in addition to what she spends on 
clothes, furs, millinery, and jewelry. A thoughtful gentleman of 
my acquaintance who loves to toy with novel ideas has advanced 
the not wholly fantastic proposal that this nation, groping about 
frantically but futilely for a new industry to pull itself out of its 
depression, might accomplish this by merely extending the area 
of the oldest industry and inducing men to go in for beauty as 
women have done. 

Oddly enough, man has never felt sure of himself in the nude. 
This in itself has made an end of the struggling cult of nudism. Men 
and women will never trust themselves to the opinions of their fel- 
lows, based on their unadorned bodies. People do not dress for 
modesty. Modesty, like many other excuses in our moral codes, 
serves a better reason. 

Human beings wear clothes to shield their nakedness, to keep 
them warm, and to adorn themselves. But a woman can hide her 
nakedness in fifty cents’ worth of cotton cloth. She can keep herself 
warm in six dollars’ worth of wool. Nevertheless she spends fifty 
dollars for her coat and five thousand if she can afford it. This will 
serve as a measure of the relative importance of these three influ- 
ences in feminine attire. People dress to conceal the defects of the 
body, to neutralize the onset of age, to hide the effects of gluttony 
and sloth. 

The sums expended every year upon the mitigation of female de- 
fects and deformities is so great that were the sex as a whole to 
agree to suspend their make-up for a single year they would utterly 
wreck the economic machine of the world. Some wag with a flare 
for statistics has estimated that her ladyship dabs on her face 4000 
tons of powder, 52,000 tons of cleansing cream, 7500 tons of nour- 
ishing cream, 25,000 tons of skin lotion, and 24,000 tons of rouge, 
all of which must be produced by workers, processed by factories, 
sold and dispensed and applied at beauty counters and salons, in- 



volving the expenditure of billions in production and distribution 
costs. Which leads to the observation that while vanity is vanity it 
is also big business and indispensable to the continued functioning 
of our economic world. 

A German artist of the last generation made a devastating series 
of drawings representing groups of important people in their most 
admired and favored surroundings, posturing in their salons, strut- 
ting in their ballrooms, posing in all their pretension and hauteur, 
looking wise and profound, staring through lorgnettes, loaded with 
jewelry — but minus their clothes. The spectacle of withered old 
men and women, with hanging paunches and drooping breasts, 
wrinkled, flatulent, stooped, made an impression that would wring 
from the most irascible hater of mockery and deception in dress a 
cry for a return to those tons of creams and lotions and rouge and 
layers of lace and fur and silk and wool. Let us expose their sins, let 
us have at them with ink and jest and invective, but for God’s sake, 
let us not undress them 1 


Carlyle, in the opening chapter of his French Revolution, refers 
to Louis XV being pictured to the French as leading his victorious 
armies, winning battles, planning new campaigns and victories, and 
charging the enemy when in fact he was a gouty, scrofulous cripple 
being carted around with the army like so much baggage. 

It is the way of the world with so many of its leaders. They are 
invented ; fictitious beings created for us out of the masculine imag- 
ination of the shirt stuffer operating upon the pliant feminine 
imagination of the masses. It is one of the least pretty of our social 

Go about Italy, and wherever there is a plaza to hold it you will 
see, mounted on a monstrous charger, a colossal warrior in bronze 
or marble, with uplifted sword and a countenance of majesty and 
p 0wer — the figure of Umberto Primo or Vittorio Emmanuele Sec- 
ondo, thus advertising to the Italian mass mind the great leader- 


ship of these two mighty sovereigns who were, in fact, just two little 
fellows whose capacities could have been duplicated among the 
lesser bureau chiefs of any town in Italy. 

But kings must be great men. They must be wise, courageous, 
full of nobility and power. As they seldom have these qualities in 
larger measure than is to be found in the members of the local 
chamber of commerce, the political promoter has collaborated with 
the military promoter for centuries to invest these small fellows 
with the missing royal attributes. They have drawn upon the age- 
old arts of pageantry, costume, feathers, flags, and music. The popu- 
lace, prepared by the proper prologue, sees a bewildered and some- 
times blundering fool encrusted in gold and other metals, crowned 
with a towering shako, upon a richly caparisoned horse capering 
between lines of saluting privates, and attended by the brass of 
the band and the cheers of the people — it sees not the little 
man at all but the fictitious figure who does not exist. Of course, a 
philosopher, a statesman, and a priest may be counted on to write 
learnedly that all this is essential to the stability of the society, as 
the king, after all, is merely a symbol, a spiritual nucleus essential 
to the well-being of the multitude of moronic protons who revolve 
around him. 

The church knows this. The great cardinal, heavy with crimson 
robes and flowing trains, mitered in gold, surrounded by surplus 
monsignori against a background of marble and brass, stained- 
glass windows, and the dim glow of candlelight and incense, and 
with the incidental emotional tremors of the organ — the cardinal 
thus made up can pretend with success to powers no one would 
credit if he lived in a cottage or dressed in a smock of cheap wool. 

And, of course, presidents, politicians, businessmen with prod- 
ucts to sell, bankers with securities to distribute understand this 
principle. All of the stratagems of make-up, of shirt stuffing, are em- 
ployed to fill the imagination of the people with fictitious images of 
the men who must be sold to the public. Selling merchandise often 
depends first upon selling to the buyers the man who produces it. 
The priceless ingredient, proclaims one advertiser, is the reputation 



of the maker for integrity. Therefore, it is important to erect the 
manufacturer of things— drugs, foods, stocks, and ideas — into a 
being of purity and intelligence. Half the job of selling a bottle of 
ineffectual jalap for rheumatism is done if the great Mr. Bunkus, 
its maker, miracle man of the drug world, jalap king, great philan- 
thropist, eloquent speaker at commercial banquets, doctor of law 
and of humane letters at Yale and Harvard, is behind the product. 
It is easy to sell the voters a bill of goods embracing the “abolition 
of poverty” or “the abundant life” if some “great” engineer or the 
great radio crooner is behind these respective emulsions. Through- 
out history we shall see that the great rulers, dictators, oil kings, 
steel kings, and money kings have employed the techniques of shirt 
stuffing to build themselves up to the proportions of heroes of one 
sort or another in the common mind. Once a man has made a million 
dollars, it is promptly assumed that because he knew how to make 
a million he knows also how to run a college, a church, a government. 
Presence on the board of the college, the vestry, or the cabinet of 
the government gave to the businessman a character that aided him 
in getting what he called “consumer acceptance” for his products. 
It has been easy to convince people affected with an abiding appetite 
for wealth that the man who has succeeded in accumulating it is 
capable of ruling them. Hence the rich man has tended to move into 
all the places of power — to dominate our education, to mold our 
theology, to form our culture, to modify our social thinking. 

A definite technique has been perfected for creating any kind of 
character out of almost any man with enough money to hire the 
professional help. His name and picture are repeated over and over 
in the press until he becomes a member of our performing celebri- 
ties, his benefactions artfully and opportunely contrived and an- 
nounced, with pictures, encomiums, editorials heralding his public 
spirit. Articles about him appear in the success magazines. Men are 
hired to write speeches for him to deliver at conventions, banquets, 
public gatherings, at colleges, and over the radio. He issues state- 
ments upon all sorts of subjects, has opinions about everything, all 
worked up and happily phrased for him by his hired shirt stuffers. It 


is an old stratagem. We have already seen Dr. Peutinger acting as 
apologist for Jacob Fugger. We shall see how other men of wealth 
have utilized the resources of religion, the press, the platform to 
build up their reputations for wisdom and patriotism as a prelude 
to exercising a dominating influence over the public mind. It is quite 
possible that the free society has no greater enemy than the shirt 
stuffer and that men will never be wholly free, in that higher and 
finer sense to which they aspire, until their minds shall be emanci- 
pated from the power of the rich to possess and control the instru- 
mentalities by which opinion is made. 



It would be an interesting speculation how far the history of the 
world has been obscured, twisted, and falsified as a result of the fact 
that writers, historians, poets, and even philosophers have depended 
upon the bounty of the rich and powerful. The very first writers, in 
order to eat, had to please the king or some powerful patron. Ap- 
parently the very earliest writings among the Egyptians, the Chal- 
deans, the Phoenicians were upon clay tablets by public officials to 
be read by the king, the priests, the court. The authors of the 
Pharaohs’ day were attached to the temple. The first Chinese writ- 
ers depended upon official appointments for their livelihood. 

The audience of all ancient writers and even of modern ones up 
to a few hundred years ago was limited, since few had the art of 
reading. Even the circulation of the old Greek works was small and 
would have been impossible without the favor of certain rich men. 
Some philosophers in ancient Athens were paid incredible sums as 
teachers, some of them — Protagoras, Gorgias, Zeno — getting as 
much as 10,000 drachmas to educate a student. But these gentlemen 
were Sophists who taught the sons of wealthy Athenians how to get 



along, how to use their faculties to the end of success. There were 
no such rewards for the realistic searcher after truth. The Greek 
playwrights, however, had an audience and hence, in the free so- 
ciety of Athens, could command comparatively substantial sums for 
their work, while they enjoyed a corresponding freedom, discussed 
public affairs, discoursed on public and private morals, and did not 
hesitate to lampoon the head of the state himself. This was not al- 
together true in Rome when the state began to provide the populace 
with plays. Terence and Plautus could get for their plays sums 
which were not available to the poets and commentators, but they 
were paid public money by the aediles who were charged with pro- 
viding dramatic productions for the people. 

Men like Horace and Virgil got little or no money rewards from 
their works. Both depended upon the bounty of Maecenas. And 
Maecenas took up the role of the magnificent patron of letters as 
a means of fortifying the regime of Augustus. Horace speaks of his 
publisher, Socii, but laments that while the publisher made profit 
from his poems, Horace made nothing. But it is highly improbable 
that any publisher made very much in a world where books had to 
be written by hand and few of the people could read. Martial, the 
epigrammist, said that the sale of his poems brought him nothing. 
But he cultivated the friendship of the Emperor Domitian and be- 
came tribune. Quintilian, the rhetorician, had an income for a while 
of 100,000 sesterces from the Emperor. And, of course, in that ruth- 
less dictatorship, there was no more place for the independent 
thinker or artist than there is in the tyrannies of Mussolini and Hit- 
ler. Before the empire dissolved all independent literary production 
had come to an end. And after that, the church succeeded to the role 
of literary dictator. 

In the modern world the same thing held true for many centuries. 
It was perhaps worse than in certain periods of the ancient world, 
for there were times and places where even the wealthy and powerful 
could not read, when this faculty was limited to a handful of people. 
It is a singular fact that the authors of such universally famed pro- 
ductions as the Edda, the Cid, the Nibelungenlied, and the legends 



of King Arthur remain unknown, while various monarchs have 
come down to us as writers. Charlemagne is a case in point — a 
F rankish German of no education, who probably could neither read 
nor write, yet who is supposed to have composed a German gram- 
mar, poems, and even a work in medieval Latin on the worship of 
images. He did gather scholars around him and encouraged litera- 
ture. But it is probable that his own compositions were the work of 
some of those shrinking persons with a passion for anonymity so 
dear to the hearts of rulers. 

As writers appeared on the scene they might well be represented 
as grasping their pen in one hand and the king’s bounty in the other. 
In France, Colomby, original academician, drew 15,600 francs as 
the king’s orator and Jean Louis de Balzac 10,000 francs as the 
king’s general eulogist. In Italy Petrarch counted his patrons among 
several of the ruling houses of Italy and was an especial ward of 
the Colonna family. Boccaccio, who learned something of his art 
from Petrarch, learned from him also how to cultivate the good 
will of the prince. He enjoyed the special favor of King Robert of 
Naples, and the Decameron was written for the King’s family, as 
the Heptameron was written for the delectation of Francis I, pos- 
sibly by his sister Margaret, but more likely by some anonymous 
spinner of yarns about the castle. 

The dependence of the writer upon the political treasury and the 
favor of the lord or merchant continued to a late day. And some of 
them did quite as well for themselves as Horace and Virgil did in 
Rome. Jean Chapelain, author of a dreary and forgotten poem 
called La Pucille, died at the age of seventy-nine, leaving a fortune 
of 1,450,000 francs, which he got in gifts from Richelieu, Mazarin, 
and Louis XIV; and Boileau, famous satirical poet, who died in 
1 7 1 1 , left an estate of $2 3 6,000 which he owed to the munificence of 
the crown. 

In time, profits from publishing did make their appearance, but 
they were meager. The writer still had to look for his security to 
reliance on the government or a patron. Milton received but sixty- 
three pounds for Paradise Lost, but he got a thousand pounds from 



Parliament for a political treatise. Gay, the author of The Beggar’s 
Opera, James Thomson, Scottish poet, author of The Seasons and 
The Castle of Indolence, and Edward Young, author of Night 
Thoughts, like the more important Addison, Steele, and Swift, were 
the recipients of royal and noble favor. Gay got a job as secretary 
to the Duchess of Monmouth, tried his hand at the South Sea specu- 
lations, lost what he had, and became a dependent of the Duke and 
Duchess of Queensbury. Thomson, a very poor youth, began his 
career as the beneficiary of a noble Maecenas, got a sinecure at 300 
pounds a year from the Lord Chancellor, and, when the Chancellor 
died, got another from the Prince of Wales at 100 pounds. Young, 
who started a school of graveyard verse, began life with a poem of 
disgusting flattery of George Granville upon his elevation to the 
peerage, and followed this with several others dedicated to one 
wealthy patron after another until he knocked off one to Walpole, 
celebrating his investiture with the Order of the Garter, and was 
rewarded with 200 pounds a year. He finally attained the heaven 
of army officers, ministers, and professors by marrying the daughter 
of an earl. 

Addison, before he was thirty, got a pension of 300 pounds a year, 
and when the government wished to exploit the popular value of 
the victory at Blenheim, Addison obliged with his poem, The Cam- 
paign, which pleased his patrons so much that he got an appoint- 
ment as Commissioner of Appeals. He held various offices and 
sinecures and, like Young, annexed as a wife a dowager countess. 
Thackeray said of this trio — Addison, Steele, and Swift — that “the 
profession had made Addison a minister, Steele a commissioner of 
stamps, and Swift almost a bishop.” The sharp-tongued Swift felt 
that his services with his pen had merited something better than an 
Irish deanery. 

But it was precisely when these men were drawing their sus- 
tenance from their political and social sponsors that another writer 
was demonstrating that England had come upon an audience which 
was willing to pay for what it read and that a man might earn a 
living as an author without putting on any man’s collar. This was 



Alexander Pope. He had some small means of his own, but he made 
a decent living throughout his life from his own labors. Samuel 
Johnson says he received 5320 pounds for the translation of the 
Iliad, from which he bought and enlarged the country estate at 
Twickenham where he lived until his death. After this period writ- 
ers became more and more dependent upon the public that bought 
their books rather than the noblemen, businessmen, and statesmen 
who hired their pens and bought their souls. Even poor Bobby 
Burns could get between five and six hundred pounds for an edition 
of his works. 

For some reason the playwright in France and England seems to 
have been as much at the mercy of the rich sponsor as the writer of 
poems and essays. Moliere made money out of the stage, but he 
was playwright, actor, and producer. Shakespeare, too, made 
enough to leave a decent competency to his family at his death, but 
it was apparently as playwright, actor, and manager that he, like 
Moliere, made his money. He did not seem interested at all in his 
plays as subjects for publication. He probably could have made 
little out of them. 

But Ben Jonson, who was a mere writer for the stage, declared 
he had never made more than 200 pounds out of all his plays. In 
France both Corneille and Racine sought and got benefits from 
various patrons. Racine tried to make his plays pay. He met with a 
resistance that reveals a curious ethical attitude toward this whole 
subject at the time. He had got 40 francs a night from the theater 
for the use of his plays. But plays seldom went through many nights 
of performances. He demanded a thousand francs. Instantly there 
was a bitter protest from the stage. Madame Beaupre, an actress, 
complained that whereas with the smaller payment the theater 
could make money for all, now with Racine’s extortionate demand 
it could not. The whole town echoed her resentment. Racine, it mur- 
mured, was attempting to trade on his poetic talents. How the poet 
could live they apparently did not consider. Nor did they suppose 
that he had but two choices, either to trade upon his talents with the 
audiences or with the politicians and the nobility. What did they 



suppose he was merchandising and to whom and for what when he 
got 140,000 francs for following the king during the royal military 
campaigns, or when he got 14,000 francs as royal historiographer 
or when he was granted a pension of 6900 francs by Richelieu? 
What was Corneille trading upon when he dedicated Cinna to the 
unscrupulous financier Montrauon? 

Yet this curious moral notion persisted. It can be explained upon 
no other ground than that the emoluments of the writer were mea- 
ger, that by abandoning them in favor of the sweeter viands of the 
patron the author was losing nothing, and that the ethical preten- 
sion that his gifts must not be prostituted by the outright sale of 
his product supplied him with a convenient defensive rationaliza- 
tion of his pension. 

Even Voltaire, whose earnings might well have been large, and 
who was rich, did not acquire his riches from his works. He gave 
away the rights of his plays. He presented some of his works to his 
publishers, asking merely some author’s copies beautifully bound. 
He presented his secretary with 12,000 francs, the proceeds of an 
edition of his works. His wealth he got through business adventures 
not unlike those carried on by our own Hetty Green. He loaned 
money to princes and to cities and bought national bonds. He specu- 
lated in lotteries, in grain, in foreign securities. He invested in con- 
tracts for army supplies, and is reputed to have had at one time an 
income of 350,000 francs a year. 

It was Jean Jacques Rousseau who in F ranee did what Alexander 
Pope had done in England. He disdained the generous offers of the 
wealthy. Instead he drove the best bargains he could for his works. 
Like many another author since, he wrote much inferior but popular 
material in order to obtain the means of devoting time to his more 
serious work. He got $2300 for the libretto of an opera which he 
turned out in a few weeks, which was something more than he got 
for Emile upon which he expended twenty years of thought and 

From this time forward the art of reading came into the posses- 
sion of an ever-increasing number of people. And, with the new 



guarantees of freedom or at least the widening tolerances, the writer 
was able to find a larger market for his wares — a market that could 
afford to pay for them. The time came when all sorts of writers, 
emancipated from the clutch of the rich patron, could earn a good 
living, while some of them became as rich as some of the former 
Maecenases. Walter Scott got $20,000 for The Lady of the Lake, 
and Lord Byron collected $13,000 for three cantos of Childe 
Harold. From his novels Scott earned a princely income of around 
$75,000 a year. Victor Hugo was paid 40,000 francs ($8000) for 
each of ten volumes of Les Misdrables. Disraeli got $60,000 each 
for Endymion and Lothair, and George Eliot got $40,000 for Mid- 
dlemarch. Alphonse Daudet collected $200,000 for a single novel, 
Sappho. And Charles Dickens was perhaps the largest earner of 

The great sums collected by successful novelists and playwrights 
in our own day are too well known to be repeated here. If they earn 
these sums it is because almost universal literacy, rapidly spread- 
ing secondary and higher education, and an ever-increasing popula- 
tion furnish them with an enormous market, while their ability to 
collect their incomes from the whole public rather than a handful 
of powerful patrons is the guarantee of the highest form of freedom 
of expression. 


Robert Owen 



The long annals of money getting have produced but one Robert 
Owen. If you can imagine one of the largest employers in America 
— Mr. Henry Ford, for instance — becoming the leader of the labor 
movement, or Mr. Tom Girdler taking the field for factory reform, 
or Mr. Owen D. Young going up and down the land clamoring for 
a recovery scheme not unlike Mr. Upton Sinclair’s EPIC plan; if 
you will conceive of a manufacturer, whose schooling got no farther 
than the three R’s, becoming the most advanced educational re- 
former of his time, using the kindergarten before Pestalozzi or 
Froebel, antedating Marx in socialism and all the Victorian re- 
formers in welfare work, you will have some idea of the sort of 
man Robert Owen was in the dawn of the industrial revolution. If 
was in amassing a fortune as a manufacturer that Owen saw the 
evils of the factory system flourish, saw challenging human prob- 
lems flowing out of the same machines that poured out wealth for 
him and set him off upon his extraordinary career of unselfish 
evangelism for the creation of a better world. 

There have been many men of wealth who have looked with 
questioning upon their possessions. Andrew Carnegie, as a young 
man, was deeply disturbed to find he had made fifty thousand 
dollars in a year and he wrote in a moment of pious possession that 
he would never permit himself to make more than this. It was a 
vow as useless as if Casanova had sworn himself to celibacy. Some 
have soothed themselves amid their treasures by giving after they 
were done with getting. But Owen, even as a young man, declared 


Brown Brothers 

Robert Owen 



war upon the system by which he was growing rich and, in the end, 
consumed his fortune in that struggle. He organized the first model 
factory system. He forced the passage of the first Factory Act. He 
built the first infant school. He pioneered in universal education. 
He built a utopian community in the New World. And he never 
ceased his pressure upon the public mind of England. When he 
was eighty-seven he wrote his autobiography. When he was eighty- 
eight he was still calling meetings and conferences. He was one of 
those rare souls who had caught a vision of the future and who kept 
his eyes all his life upon the far-off hills. Though it was a modest 
one, no fortune in history has had so profound an effect upon the 
course of human events. 


Owen was born at Newtown, in Montgomeryshire on the Welsh 
border, on May 14, 1771, the son of the village saddler and iron- 
monger. He was born into an England that was overwhelmingly 
agricultural but alive with a score of professional and amateur 
mechanics and inventors who were tinkering with all sorts of 
clumsy little machines that would revolutionize the world and its 
way of life. 

He had a business career that satisfied all the specifications of a 
Samuel Smiles success story. He got no more education than a 
bright boy under ten could get from a gentleman who apparently 
knew but little more than his scholars, and who was named Mr. 
Thickness — a name hardly surpassed by the schoolmaster of 
Dickens’ Coketown, Mr. Choakumchild. 

At nine he was assisting the schoolmaster. 

At ten he set out, like Dick Whittington, for London, to seek 
his fortune, with but forty shillings in his pocket. 

In a few months he was apprenticed to a Mr. McGuffog, a draper 
in Lincolnshire, an excellent and honest merchant who proved a 
sound exemplar. He attended the Presbyterian Church with Mr. 
McGuffog and the Church of England with Mrs. McGuffog, gen- 



erating such a supply of tolerant piety that he was called “the 
little parson,” but also acquiring a healthy skepticism of the creeds 
preached by the rival ministers. 

At thirteen he was a clerk with Palmer and Flint, a drapery 
house on London Bridge, working from eight in the morning to mid- 
night and often later. Palmer and Flint were pioneers in their way. 
They ran an eighteenth-century cash-and-carry store, with fixed 
prices and moderate markups. 

At sixteen young Owen transferred his activities to a wholesale 
draper in Manchester. This was 1787. From across the Channel 
came the rumblings of the French Revolution that would stir 
England and particularly her young thinkers and writers like 
Southey and Wordsworth. But young Owen would remain un- 
touched by this storm. He was far more interested in another revo- 
lution that was now in full swing — the industrial revolution. And 
Manchester was the scene of some of its most notable victories. 
In this feverish hive, filled with its new breed of self-made men, 
its boosters and Babbitts, the young neophyte of business was far 
more interested in getting along and ahead than in making over 
the world by such violent means as were being used by the Paris 
mob. In this year, at eighteen, Owen went into business for himself. 

With a hundred pounds borrowed from a brother in London, he 
formed a partnership with a practical mechanic to manufacture 
spinning machinery. It ended quickly, Owen taking some of the 
machines they had made and starting by himself as a spinner. He 
prospered and was soon making six pounds a week profit. At twenty 
he answered an advertisement of a Mr. Drinkwater who owned a 
mill and wanted a new manager. Owen demanded £300 a year and 
got it. Thus at twenty this budding success-story hero found him- 
self the manager of a plant with 500 hands and a contract for £400 
the second year, £500 the third, and a fourth interest after that. 

Two years later Drinkwater was negotiating to combine his 
interests with Samuel Oldknow, a rising cotton lord, and Owen was 
shouldered out of the promise of a partnership. He quickly formed 
another partnership with a new concern backed by two substantial 



Manchester cotton firms. This was the Chorlton Twist Company. 
Owen found himself building a large mill in the Manchester sub- 
urbs that he later operated as managing partner. His duties forced 
him to travel about, and in these commercial wanderings he met at 
Glasgow a lady named Anne Caroline Dale. Her father was a 
banker and manufacturer who had built several cotton mills in 
Scotland. One he had put up at New Lanark in partnership with 
Richard Arkwright, famous for having introduced certain im- 
portant spinning inventions. But Dale and Arkwright had parted 
company and Dale was looking for a buyer for the New Lanark 
mills. Owen, with his partners of the Chorlton Twist Company, 
bought the property for $300,000, payable $15,000 a year. And 
for good measure Owen married Dale’s daughter. After a brief 
time he moved to New Lanark where he assumed the complete 
management of this, one of the largest cotton spinning enterprises 
in Scotland. This was in 1800. And here he was to round out his 
fortune, make large profits for his partners, and make the name of 
New Lanark famous throughout Europe and in industrial history. 

But Owen’s social experiments at New Lanark landed him in 
trouble with his partners. Before he got through he had three sets 
of them. All feared their investments were being imperiled by 
reform. The first set rebelled when Owen proposed to use company 
funds to build a school for the children. Owen dug up a fresh set 
of partners and bought out the original ones, paying them $420,000 
for a plant that had cost them $300,000 and on which they had 
made five per cent a year and an additional $180,000 in profits. 

The next set became alarmed when Owen’s educational ideas 
clashed with their solid British orthodoxy. Also they saw an oppor- 
tunity to grab a flourishing enterprise at a bargain price. They 
dissolved the partnership and demanded a public sale, circulated 
stories of the mills’ difficulties, and insisted they were not worth 
forty thousand pounds. But at the auction they bid up to $570,000, 
whereupon Owen topped them with another $500 and got New 
Lanark. His third brace of partners comprised some wealthy busi- 
nessmen with reform ideas, including Jeremy Bentham, the famous 



utilitarian philosopher, and the well-known Quaker, William Allen. 

Then for another twelve years, Owen, with a freer hand, de- 
veloped this industry until it was certainly the most famous, if 
not the greatest, in England. In the end — in 1825 — his last batch 
of partners drew away from him, some seeing in his schools “a 
manufactory of infidels.” His management of New Lanark ceased 
in 1825. He withdrew his interest altogether in 1828. 

Owen became a very rich man. But no satisfactory estimate of 
his fortune has been found. It was, however, a modest fortune and 
is important, indeed epochal, not for its size but for the fruits it 
produced in Owen’s mind, the things it enabled him to do to the 
very processes by which he got rich, the influence it enabled him 
to exercise upon the new industrial system in the very years of its 
birth. He spent it as freely as he made it, and after 1828 he ceased 
to make any more. It was finally exhausted in his numerous cru- 
sades, until at last he was wholly without funds and lived upon a 
modest allowance of £360 a year from his sons, who managed to 
disguise it as the fruits of some old investments. 

in . 

The significance of Owen lies in the fact that he began his 
career as the industrial revolution appeared in Europe. England 
was fascinated by her new gadgets. They gave birth to the modern 
factory. The nation was preoccupied with driving the new ma- 
chines, multiplying its wealth, perfecting the wealth-making or- 
ganization and devices. Owen saw that these machines were doing 
something to the soul of England. He became preoccupied with 
that phenomenon. 

The factory was a new economic weapon of profound im- 
portance. It enabled the acquisitive man to do something hitherto 
but little understood — to share in the fruits of the labor of many 
persons in the field of production. Hitherto this was possible only 
in agriculture, in merchandising, in finance. But the industrial 
producer had until now remained a more or less solitary worker. 



The Cotton Lord was enabled to do in the field of industrial pro- 
duction what the Land Lord was able to do in the field of com- 
modity production. 

The factory was not wholly new. Cephalus employed a hundred 
and fifty men in his shield factory in Athens. There is a story of 
John Winchecombe — Jack of Newbury — in Henry VIFs day, the 
“most considerable wit of fancy or fiction England ever beheld” 
who kept a hundred looms in his house, each managed by a man 
and a boy. But these were merely central shops. They were very 
uncommon and were of little economic importance. 

Before this time the method of making cotton cloth was quite 
primitive. The raw cotton was picked and teased to remove the 
seeds. Then the fibers were combed out by hand. The next step 
was to twist these fibers into a thread by means of the old-fashioned 
spinning wheel that had been brought to England from India in 
the thirteenth century. The threads were then put upon a loom 
worked entirely by hand. And all this was done in the home of the 
weaver. The women and children did the seeding, combing, and 
spinning. The men managed the loom. The family was an organized 
industrial producing unit. The town merchant supplied the raw 
cotton and frequently the patterns for the cloth and bought the 
finished cloth from the weaver. This was indeed the pattern of all 
production. And under this old handcraft system it was difficult 
for anyone to share in the product of the producer. 

But a series of inventions began to make its appearance in the 
eighteenth century. Kay invented the flying shuttle in 1738. In- 
stead of throwing the shuttle by hand between the warp threads, 
the shuttle was now shot in each direction by a spring released by 
pulling a cord. Thus one man could do the work of two. In 1765 
Hargreaves invented the spinning jenny, called after his wife, 
whose wheel gave him the idea. It enabled a person turning one 
wheel to spin eight spools at once. And before long this was eighty. 
Then came the inventions of Arkwright and Crompton, improving 
the spinning jenny, and later still the application first of water 
power and then of steam to the operation of spinning machinery 



and looms. Eli Whitney eliminated household seeding with his 
cotton gin and Dr. Edward Cartwright completed the process with 
his invention of the power loom. 

The home was no place for these cumbersome machines. It was 
immediately obvious that the way to use them with the greatest 
profit was in clusters under a single roof. They made the factory 

It was into this rapidly developing industry that was producing 
its Manchesters and Birminghams and Glasgows that Owen 
stepped, with no education in economics or the social sciences. But 
he began to see very quickly that the factory was making deep 
marks upon the human beings it was using as well as upon those 
it displaced. 

Manufacture of cotton was no longer spread out over many 
places. It became concentrated in lumps and clusters — in cities. 
And it grew around cities that had access to water power. It 
made production swifter a 1 cheaper, so that England began to 
supply the world with cotton thread and cloth. It shaped the 
destiny of England, whose Cotton Lords clamored for more laissez 
faire, more freedom at home while they fought also for wider 
markets abroad, markets that England proceeded to acquire by 
capture and to subject to the most rigid control — an inconsistency 
extinguished by the wondrous solvent of patriotism. 

This manufacture of cotton summoned to the surface very 
quickly a new breed of gentlemen who knew how to organize and 
manage and promote and get hold of capital. It augmented heavily 
the number of rich enterprisers. It reinforced the great middle class. 
It set up a new equestrian order in Britain. It made a powerful 
group of Cotton Lords — and later Iron Lords and Railway Lords 
and other categories of industrial nobles — who challenged the su- 
premacy of the Land Lords. It unloosed a mania for money getting 
since it supplied a new and potent weapon. The predatory soul 
spun calculating dreams of wealth such as lit the flames of cupidity 
in Leonardo da Vinci’s soul when he invented, of all things, a 
needle-making machine. “Early tomorrow,” he writes, “I shall 



make the leather belt and proceed to trial. . . . One hundred times 
in each hour 400 needles will be finished, making 40,000 in an hour 
and 480,000 in 12 hours. Suppose we say 4,000 which at five elidi 
per thousand gives 20,000 solidi; 1000 lira per working day, and 
if one works 20 days in the month, 60,000 ducats the year.” 1 

Owen saw all this with dismay and commented on “the love of 
luxury which had induced its possessors to sacrifice the best feel- 
ings of human nature in their accumulation.” 

On one hand this industry caused larger streams of money in- 
come to flow through the land, producing greater prosperity in 
good times and deeper distress in hard times. The capitalist found 
endless avenues for pouring his profits into new investment as fast 
as he made them. The worker was paid in money wages, and 
monthly there flowed out into the streams of business numerous 
rivulets of money purchasing power, so that England found herself 
wallowing in a new kind of prosperity. 

In a generation England had undergone a profound change. In 
1775 she was an agricultural country. By the census of 1811 the 
agricultural population was but a quarter of the whole. The cotton 
mill had done this. 

And what had this done to the workers? They had been con- 
gregated into unwholesome clusters, into hot, ill-ventilated mills, 
where they worked long hours at low wages. They dwelt in foul 
houses. The mills devoured all the hands they could lay hold of — 
men, women, children. Money wages rose, but there was more need 
of them since the worker now produced nothing for himself. 

Behold the dreary lot of the factory worker 1 At five in the morn- 
ing the clanging of the factory bell drew the long streams of un- 
rested slaves through the dark streets to their brick prisons. At 
seven there was a half-hour for breakfast — tea or coffee, a little 
bread, perhaps some oatmeal porridge; a scant mess with the tea 
bad and the infusion weak. A half-hour at noon for dinner — boiled 
potatoes in one dish, with melted lard for the poorer workers, 

1 Technics and Civilization , by Lewis Mumford, 1934. 



butter for the better paid; for the most favored a few pieces of fat 
bacon over the mess. For the factory worker the roast beef of old 
England was just a phrase in a song. At seven or eight or nine in 
the evening the streets were darkened again with the drudges trudg- 
ing home to tea or maybe a glass of grog. The streets were narrow, 
dirty, without drainage or scavengers. The houses were poor, 
usually one room to a family. The slum at its worst had arrived. 

Early in the factory era the parish board took to farming out 
the pauper children. They were called pauper apprentices. These 
wretched children, toiling for twelve, fourteen, even sixteen hours a 
day, were far worse off than slaves. One observer said the children 
“lived the life of the machine while working and at other times that 
of a beast.” Imagine, if you can, the lot of the child of ten who 
went to work at five in the morning, with only a stop for breakfast 
and dinner, and quit his machine at seven or later at night, and 
getting for this brutal grind two shillings, twopence a week. 

The discipline was rigid. There were rules and fines for every 
infraction of them, ranging from one to six shillings; there were 
fines for leaving an oil can out of place, fines for being found dirty 
or being found washing, fines for leaving a window open or for 
spinning with the gaslight on too long in the morning. The Cotton 
jLord, who bent over his hymnal on the Sabbath and gave three- 
times-three for the glories of laissez faire, bound his workers in a 
harness of iron discipline beside which Owen found the life of the 
American slave one of freedom and ease. The employer, indeed, 
had now found something better than the slave. The slave must be 
bought with a capital outlay and supported in all times. The factory 
worker involved no initial investment so far as his body was con- 
cerned and could be laid off when times were hard. 


At twenty-nine years of age Owen assumed the direction and 
part ownership of one of the largest of these modern juggernauts. 
New Lanark was about thirty miles south of Glasgow on the Falls 



of the Clyde which furnished its power. It consisted of four huge 
main buildings of graystone quarried near by, each seven stories 
high and surrounded by smaller workhouses. The buildings, set in 
a lovely circle of hills, were themselves gaunt, grim fortresses after 
the model of the large mills of that day. 

Between 1800 and 2000 persons dwelt in the village and an ad- 
ditional five hundred pauper apprentices were housed in a separate 
building. Owen has described this population when he assumed 
control: “ a collection of the most ignorant and destitute from all 
parts of Scotland, possessing the moral characteristics of poverty 
and ignorance . . . much addicted to theft, drunkenness and 
falsehood.” The housing was bad — one family to a room and no 
sanitary arrangements — and the streets were narrow and filled with 
filth. The people hated the mills. There were no public houses, the 
former owner Dale being a rigid prohibitionist, but there were 
bootleg joints. Many different churches, each with a different creed, 
led to no end of hostility between the communicants. 

Owen’s first services arose out of the reactions of a generous and 
just spirit to these bad conditions. Yet bad as it was, New Lanark 
was one of the better mills, and Owen had seen much of the in- 
dustry in which he had now been engaged for eleven years. He 
had not yet formed that social and economic philosophy that later 
brought him into collision with all the respectable elements in 
Britain. Generally speaking, he began with the assumption that 
these men and women and children had rights that employers were 
cruelly ignoring, and he made up his mind to respect those rights in 
his own mill. And this led him to that philosophy which character- 
ized the welfare movement of the next hundred years: the spirit of 
noblesse oblige; the principle that the rich ought to be good to 
the poor. 

In pursuance of this, Owen introduced a series of reforms into 
New Lanark which made it the first model factory. 

At the outset he put an end to the employment of the pauper 
apprentices. He took in no more and let out those who were there 
as fast as their indentures expired. He employed no children under 



ten. He limited hours for all to ten and a half — though he believed 
they should be less, even eight, he was never able to cut them below 
ten and a half. He ended the fines and introduced an honor system. 
He greatly improved the houses and doubled the accommodations 
per family. He supplied playgrounds. He built two school buildings 
and gave the children the advantages of the best free education 
then found in England before they went to the mills, and thereafter 
provided evening instruction. He arranged for lectures, meetings, 
dances for the adults and threw open to the people for recreation 
the woods which the company owned. He provided for medical 
attendance, established a sick club, a savings bank, and summer 
courses of study in the open air for all. He made available meeting- 
houses where men of any denomination might speak, ensuring com- 
plete religious freedom in New Lanark. And this made a very dark 
item in the bill of particulars against him when his battles began. 

No one in our day will see anything subversive in all this. Indeed 
even the more conservative employer provides more than this now. 
Yet it was the introduction of these reforms over a series of years 
that brought Owen into conflict with his partners, even those later 
ones who had joined him because of sympathy with his humani- 
tarian objectives. But no one could question the fruits which ap- 
peared at New Lanark. The early, sullen hostility of the people 
had been broken down, a process that was completed when, in 
1806, America put an embargo on raw cotton shipments to Eng- 
land. Owen and his partners decided it was best, rather than pay 
extortionate prices for speculative cotton, to shut down the mills. 
But for four months he continued to pay the employees their full 

Over 25,000 persons, educators, social workers, manufacturers, 
parliamentary and county and town committees signed the register 
book at New Lanark as visitors to inspect these reforms. Owen 
himself said in 1812 that this same population was “conspicuously 
honest, industrious, sober and orderly and an idle individual, one 
in liquor or a thief is scarcely to be seen from the beginning to the 
end of the year.” And above all — miracle of miracles — the com- 



pany that sponsored all this was singularly prosperous and those 
who owned it grew rich from it. 


Owen, disturbed by the evidences of inhumanity, cruelty, greed, 
injustice all about him, was nevertheless not so naive as to suppose 
that the ignorant and debased proletarians of his day were capable 
of forming the better world he began to see beyond the far-off hills. 
He believed that the world had to be made a better place for men 
to live in dignity. But he was equally convinced that men had to be 
made better to participate in the treasures of such a world. 

Apparently Owen started out with nothing more than a con- 
viction that all children, as a matter of human justice, should have 
an opportunity to have an education. But he soon went beyond this 
and imported into his theory the proposition that this education 
should be of a very special kind; that, while training the mind for 
the benefit of the individual, the character should be formed upon 
a model designed to enable the individual to live in an enlightened 
society. The formation of character became the cardinal principle. 
And that, Owen believed, must take the direction of developing the 
social virtues — the human sympathies, an understanding of the 
rights of others, a hatred of the antisocial virtues of greed, ac- 
quisitiveness, dishonesty, private and public. Owen had long before 
abandoned any faith in any existing religion. But he held as a 
utilitarian principle that a cultivated modern society of free men 
cannot be operated successfully without a highly developed and 
universally accepted code of social ethics. And what is more, he 
believed this could be accomplished. His own statement of his edu- 
cational principle ran as follows: 

A man’s character is a product of the circumstances in which he is 
born, lives and works. Evil conditions breed evil men; good conditions 
develop good men. Today man is surrounded by conditions which breed 
selfishness, ignorance, vice, hypocrisy, hatred, war. If a new world is to 
be born the first thing that must be done is to spread the truth concerning 



the foundation of character, namely that man’s character is made for him 
and not by him. 

It was to lay the groundwork for this dream of a world of socially 
educated men and women that he established in 1816 at New 
Lanark his Institution for the Formation of Character. 


The time came when Owen determined to compel his fellow 
manufacturers to clean house. They cheered heartily his plans to 
reduce the duties on raw cotton, but they turned a deaf ear to his 
proposals for humanitarian reform in their plants. Then he decided 
that the state should compel them to be good. He therefore pre- 
pared his famous Factory Act, mild enough as we inspect it now 
but epochal in that it marked the beginning of the long struggle for 
justice to workers that is not yet wholly won. 

Owen’s act applied to cotton, wool, flax, and silk mills. It limited 
hours to ten and a half a day, prohibited employment of children 
under ten, fixed the working hours of children as sometime between 
five A. m. and seven p. m., provided for medical attendance in cases 
of contagious diseases, compelled a half-hour daily instruction 
period for children in a suitable place, and gave to justices of the 
peace the right of entry and inspection. 

The introduction of this bill into Parliament was the signal for 
calling into action that intransigent reactionary energy known as 
the manufacturers’ association. Manufacturers, like other men, are 
far from monsters and have their share of good and bad citizens. 
But the manufacturers’ association is one of those ingenious in- 
ventions that enables the members to preserve their individual 
decencies while entrusting the promotion of their baser social ele- 
ments to another. It was then, as it has generally been, the spirit of 
aggressive selfishness with its hired philosophers and economists 
and statisticians and publicity men. It proceeded to fight Owen’s 
moderate proposals as it has since fought almost every step in 



civilized industry, even when its individual members were advanc- 
ing; as it has since fought compensation insurance, child-labor 
laws, humane restrictions of female employment conditions, col- 
lective bargaining, wage and hour standards. 

Owen, with his son, toured the mill towns and villages and 
painted for Parliament a dark picture of their indecencies — chil- 
dren working fifteen hours a day and more, some of them infants 
as young as four; foremen carrying leather thongs to get out of 
the young by flogging the compliance they extorted from their 
elders by means of fines; a fifth of the children in shoe factories 
crippled or otherwise injured by diseases and other abuses. 

But the manufacturers’ association was not idle. It investigated 
Owen and New Lanark. When he charged them with flogging little 
children, they replied with the impressive revelation that he per- 
mitted dissenting ministers in New Lanark meetinghouses. When 
he pleaded for a measure of Christian compassion for the poor and 
downtrodden, they countered with the charge that he was a heretic. 
They investigated not his business practices but his religious tol- 
erance. They paid the expenses of a minister from New Lanark 
who testified that he had heard his wife quote what she had heard 
Owen say in a public speech. As the manufacturers’ association 
today replies to all charges with the cry of “Communist,” their 
predecessors in Owen’s day cried “infidel.” But they could not say 
he would ruin their industry, for, with far more exacting standards 
in his own mill and against an unrestrained competition, he had 
made notable profits for himself and his colleagues. 

In a noble passage Owen depicted the narrow vision of the men 
who fought him: 

I am well aware, my lord, of the claims which these propositions will at 
first call forth from the blind avarice of commerce; for commerce, my 
lord, trains her children to see only the immediate or apparent interest; 
their ideas are too contracted to carry them beyond the passing week, 
month or year at the utmost. They have been taught, my lord, to consider 
it the essence of wisdom to expend millions of capital and years of ex- 
traordinary scientific application as well as to sacrifice the health and 



morals of the great mass of the subjects of a mighty empire that they 
may uselessly improve the manufacture and increase the demand for 
pins, needles and threads; that they may have the singular satisfaction, 
after immense care, labor and anxiety on their own parts to destroy the 
real wealth and strength of their own country by gradually undermining 
the morals and physical vigor of its inhabitants for the sole purpose of 
relieving other nations of their share of this enviable process of pin, 
needle and thread making. 

This from one of England’s foremost thread makers. 

Owen put his finger on one of the most amazing stupidities of 
the industrialists — their failure to see that their workers were also 
consumers and that while England carried on the mightiest efforts 
to win markets abroad, she excluded her own workers from the 
market place for the goods she produced, by giving them low 
wages and long hours. In our own time it dawned upon our own 
manufacturers, with the force of a discovery, that men buy nothing 
while they are at work; that much of their spendings occur in 
their hours of leisure, and that men with pauper wages who are 
fatigued beyond endurance by long hours can purchase nothing. 
Yet in the very struggle over the first Factory Act, a hundred and 
twenty-four years ago, this enlightened manufacturer warned his 
colleagues that “no evil ought to be more dreaded by a master 
manufacturer than low wages and long hours. . . . These [their 
employees] are in consequence of their numbers the greatest con- 
sumers. . . . The real prosperity of any nation at all times may be 
accurately ascertained by the amount of wages or the extent of 
comforts which the productive classes can obtain in return for 
their work.” It has taken a hundred and twenty-four years to make 
employers see that, and, even yet, only imperfectly. 

It would be unfair to say there were no manufacturers who 
sympathized with Owen. One, Sir Robert Peel the elder, greatest 
of the cotton lords, was a member of Parliament. He was entrusted 
with the handling of the bill. But he held conference after con- 
ference with his fellow mill men; he yielded on point after point. 
In the end — in 1819 — the bill was passed, but frightfully diluted. 



It was limited to cotton mills, the hours of work were raised to 
twelve, the age for children was reduced from ten to nine, no 
inspection was provided. Owen denounced this compromise and 
washed his hands of the bill. But it was a beginning and he alone 
was responsible for what was to be the first step in a long and fruit- 
ful struggle for the welfare of the masses. 


In June, 1815, the allied armies of Europe crushed Napoleon at 
Waterloo. But something else came to an end — the war boom in 
England. England fought Napoleon the way we fought the Kaiser, 
not only with men, but with guns, munitions, ships, and money 
loaned to her allies and spent for the most part in England. Bir- 
mingham and Manchester and London had boomed like Pittsburgh 
and Bridgeport and New York. Fortunes were made. But the war 
was the customer. When the war ended the customer vanished. 
The boom folded up in 1815 as it did in 1919. Warehouses and 
shelves were filled with unsalable goods. Mills closed down, or cut 
their wages and workers. Many were already idle because of the 
displacement of the hand spinners and the revived Enclosure Acts 
that drove farmers from their acres. Now the cotton and wool and 
flax mills poured their thousands into the ranks of the unemployed. 
The war had made the farmers rich — wool and wheat prices soared. 
Now they demanded that the government keep these prices up. A 
law was passed excluding foreign grain unless home-grown grain 
should rise above eight shillings per quarter. 

Discontent flamed up menacingly. Poverty became a scourge. 
Crimes multiplied. By the middle of 1816 the situation was serious. 
Then the obvious step was taken. A conference was called — as was 
done by Mr. Hoover in 1929 — of the lords of the realm, the Land 
Lords and the Cotton Lords. The radicals had a plan — parlia- 
mentary reform, ballots for people who cried for bread. The Land 
Lords had a plan — to raise a fund for charitable distributions. Mr. 
Owen was asked for his views. He gave them, but they were based 



upon certain fundamental maladies and disarrangements in the 
economic system. They were listened to with attention. But the 
conference ended by naming a committee to raise a fund and to 
enquire further. The Duke of Kent — Queen Victoria’s father — 
was the chairman. Owen was made a member. He was asked to 
prepare a plan. He did. And when he presented his plan at a 
meeting of the committee presided over by the Archbishop of Can- 
terbury it is not difficult to believe that that gentleman and certain 
others arched their noble and sacerdotal eyebrows. This plan 
marked the beginning of Owen’s slide into the realm of utopian 
socialism, and he was proposing it to men who worshiped not a 
Trinity, but a quadripartite god — The Father, the Son, the Holy 
Ghost, and Property. 

Here was his plan. Society had found a means of producing 
goods beyond the “revenues” of the people to buy. This disparity 
between goods produced and available purchasing power seemed 
to him the hub of the problem. Having more capacity to produce 
than to buy, manufacturers deemed it necessary to reduce ca- 
pacity. Capacity consisted of men and machines. But the machines 
were cheaper than the men, so the men were let out. But the men 
let out were also consumers. The machines were not. Thus the 
ability of society to consume was once again diminished more than 
its capacity to produce. 

The men let out became a charge upon the taxpayers, which still 
further added to the burden of the manufacturer. 

Owen then offered a scheme. It will sound strangely familiar to 
American readers who recall Mr. Upton Sinclair’s EPIC plan that 
inflamed the imaginations of some Californians and the terrors of 
others in 1934 to such an extent that Mr. Sinclair was almost 
elected governor. 

Owen proposed first that the poor and unemployed be taken at 
a stroke off the backs of the taxpayers. This proved as enticing in 
Britain as it did in California, for the employer, having perched 
on the backs of the workers, now found that a large number of 



them in turn had climbed on his back. Owen proposed that the 
unemployed should be literally lifted out of the normal economic 
system and placed in a separate one. They would be settled in vil- 
lages of co-operation. The village would produce what it needed 
for its subsistence. The villagers would be producers and con- 
sumers. Thus what the unemployed produced would not augment 
the supply of goods offered in the commercial markets. But by 
producing what they needed they would also supply themselves 
with purchasing power that would not be taken out of the pockets 
of the taxpayers. Many such villages would be established and 
financed by the government or by counties or cities or private 
organizations. The villages would exchange goods with each other. 

A village would cost from sixty to ninety-six thousand pounds 
to organize. The homes would be erected at the center of the village 
— large apartments of modern construction. Thus, the people 
would live in communal dwellings; the meals would be prepared 
in a common kitchen; there would be playgrounds, schools, and 
the rest. And the fields would lie all around this communal garden 
center. The subscribers would lose nothing as the villages would 
be able to pay five per cent interest on the investment, though how 
they could do this without sending their goods into the general 
market was not disclosed. The Archbishop’s committee quickly 
dropped this rather hot potato by referring it to a parliamentary 
committee. There it did not even get a hearing. Whereupon Owen 
took his plan to the country. And in the subsequent agitation he 
broke completely with the highly respected persons who had 
hitherto given their moral support to his humanitarian adventures. 


Almost without knowing it, Owen was slowly drifting out of the 
troubled ocean of benevolent capitalism into a new sea, unknown, 
uncharted, little understood. 

Owen was not an economist, but a social philosopher. He was a 



schematic philosopher whose reflections drove him to make blue- 
prints for the world of tomorrow. He was a utopian who set out 
to build his own Land of Nowhere. 

His ideas were not, of course, wholly new. The dream of the City 
of Light and Justice was an old one with which men had played 
since Plato. Saint Augustine had described his own theocratic 
community — the City of God. Thomas More, recently canonized 
by that church which is today the stoutest defender of property, 
attacked the institution of private property, envisaged a planned 
society on the agricultural model in which the needs of the people 
would be the basis for calculating the volume of production, with 
a six-hour day and the exchange of goods between town and coun- 
try without a money medium. This was More’s Utopia, discovered 
by his fictitious Portuguese scholar and sailor, Raphael Hythloday. 
He described a democratic government, widespread education, and 
that democratic ideal of the latter-day utilitarians — the greatest 
good of the greatest number. 

After this came a whole string of explorers of the Land of No- 
where and founders of dream cities — Bacon with his Atlantis and 
his Solomon’s House, forerunner of the House of Magic where 
scientists would invent a perfect world ; Andreas’ Christianopolis, 
peopled by artisans steeped in the higher learning, desiring peace 
and renouncing riches; and Campanella’s City of the Sun, with a 
government of the elite, without riches or poverty and a commu- 
nistic dictatorship. 

Behind all these visions, however, lay specific ideas — the effort 
to produce democratic equality, to create abundance, to redeem 
all men from ignorance, to secure peace. It was the ancient dream 
of ending war, poverty, vice, ignorance. And Owen, like many of 
the others, saw ignorance at the bottom of it all. 

Before Owen, reformers of various types were playing with the 
idea of the labor theory of value — Babeuf, Etienne Cabet, and, 
above all, Saint-Simon and Ricardo. Others toyed with the concept 
of public ownership of industry, the principle that each should 
contribute to society according to his capacity and each should be 



rewarded according to his needs, as Le Blanc put it, or according 
to his services, as Saint-Simon put it. These ideas and a dozen 
others — Thomas Paine’s inheritance tax, Thomas Spence’s land 
tax (forerunners of the single tax), Prudhon’s assault on property, 
Godwin’s utilitarianism — filled the air, animated discussions, gave 
birth to movements. 

It is a little difficult to determine just how Owen got hold of his 
various ideas. He had been an omnivorous reader in his youth, 
but had passed his mature years as a man of action in business 
and social reform. He had met, however, many of the eminent 
social thinkers of the time. Bentham was one of his partners. 
Ricardo was deeply interested in his plan. He knew William God- 
win and was undoubtedly greatly influenced by him. He may have 
got hold of the labor theory of value from Ricardo or he may have 
evolved it himself. It is entirely probable that he came himself 
upon the important truth about the grand flaw in the economic 
system. In a memorial presented to the conference of powers at 
Aix-la-Chapelle he said: 

The grand question now to be solved is, not how a sufficiency of wealth 
can be produced, but how the excess of riches, which may be most easily 
created, may be generally distributed throughout society advantageously 
for all and without prematurely disturbing the existing institutions and 
arrangements in any country. 

That question is still baffling the statesmen who are trying to 
find the magic formula for distributing all that we can produce 
within the framework of the capitalist economy. No one else at that 
time saw this so clearly or expressed it so decisively as the grand 
problem of the age. 

Owen still believed it might be worked out without prematurely 
disturbing the existing institutions. The very use of the word “pre- 
maturely” indicates his suspicion that eventually the “existing 
arrangements” would be disturbed. He hated revolution. He hated 
violence. He hoped that gradually, by means of education and by 
slowly insinuating his villages of co-operation into the existing 
society, they would expand, increase, and finally supplant the 



society. Owen himself said he owed his plan for these villages to a 
John Billars who recommended them in 1696 and whose pamphlet 
Proposals for Raising a College of Industry of All Useful Trades 
and Husbandry Owen reprinted. 

Owen appealed to public opinion to adopt his plan. And as he 
crusaded for it he began to make it plain that he regarded this plan 
not merely as a palliative to meet the emergency of the depression, 
but as a wholesome pattern for the organization of society upon 
a new collective model. Owen was becoming the first great socialist 
leader of England — a utopian socialist, it is true, but nevertheless 
a socialist expounding what came to be the standard socialist 
diagnosis of the capitalist system. 

He wrote articles for the newspapers, outlining his plan, and 
bought thirty thousand copies of the papers a day, which he sent 
under the frank of an M.P. to the ministers, the members of Parlia- 
ment, magistrates, and religious leaders in every city. He spent 
twenty thousand dollars for this alone. He printed pamphlets by 
the thousands and carried on an extensive propaganda by every 
known means. His plan was opposed by the Radicals — advocates 
of parliamentary reform. They called his villages “parallelograms 
of paupers.” He was opposed by the Malthusians. Apparently he 
grew indignant at the opposition of the clergy. And so in a historic 
meeting he denounced the “gross errors that have combined with 
the fundamental notions of all religions.” He said that by the aid 
of these errors man had been made “a weak, an imbecile animal; 
a furious bigot and fanatic; or a miserable hypocrite.” “I am not 
of your religion,” he told them, “nor of any religion yet taught in 
this world.” Thereafter he lost the sympathy of a few high ecclesi- 
astics like the Archbishop of Canterbury who had given him their 
support. It was possible then to demolish any proposal of Owen 
by calling him an “atheist.” 

But events were playing into his hands. The depression follow- 
ing the war continued to deepen. The unemployed thousands, the 
dispossessed farmers and farm hands, the underpaid and enslaved 
mill workers grew wrathful. The poor-relief system was breaking 



down under the strain. Indeed, the whole subject of relief was just 
such a nightmare as it was in America in 1932, or, indeed, as it is 
today. England’s poor laws had been fashioned in the dark times 
of Henry VIII and Elizabeth; hence workhouses, the free materials 
to be processed by the poor, the overseers of the poor, and finally 
that most monstrous of all poor laws, the farming out of pauper 
apprentices. This remained the backbone of the English system 
until 1834. There was one more demoralizing addition — the allow- 
ance system, introduced in 1782, under which paupers were farmed 
out, their wages collected by the county authorities and augmented 
by a public subsidy. This demoralized the worker and made a 
paradise for the employer who wanted workers for pauper wages. 
England was spending ten million pounds on poor relief in 1783. 
In 1818 she was spending thirty-nine million. 

Workers sought to combine, but the laws still forbade it. The 
wretched victims of relief and unemployment began to riot here 
and there. There were outbreaks among the midland miners. Mills 
were set on fire. The Ludites, named after Ned Ludite, a village 
idiot who to be avenged on his tormentors broke some machinery, 
began demolishing mill machines. The ministry was frightened. 
It remembered the terrible anger of the Paris mobs. It held fast 
to its confidence in the iron hand. Rioters were disbursed by hus- 
sars. The jails were filled. The habeas corpus act was suspended. 
Meetings were forbidden. The circulation of pamphlets was ruth- 
lessly crushed. All the sacred guarantees of the Magna Charta 
were put under foot. Then came Peterloo. Some eighty thousand 
unemployed assembled on the field of St. Peter outside Manchester. 
It was an orderly meeting. The bands played God Save the King. 
But the authorities were terrified. And when an orator attempted 
to address the crowd, the soldiers were ordered to charge. Eleven 
were killed, four hundred wounded — some women and children. 
A thrill of horror swept over the country, horror in the breasts of 
the lords of land and cotton, leading to more suppressions; horror 
in the breasts of the poor at the death of their comrades. 

In these desperate circumstances many responsible people in 



England, not knowing where the cure for all this disorder lay, were 
driven to consider with tolerance the plan of Robert Owen, who was 
so eternally positive about its value. Another meeting was called 
about it, another committee named, headed by the Duke of Kent. 
And this committee actually recommended that a trial be made 
with one village. It recommended that a fund of five hundred thou- 
sand dollars be raised. Owen himself promptly subscribed fifty 
thousand. But no other considerable amount was forthcoming. The 
bright vision faded. And Owen turned his eyes to the New World. 

In 1826 on the banks of the Wabash River in Indiana, Owen 
established a village of co-operation on the model that he had been 
urging in England. New Harmony was already a co-operative coni' 
munity established by a group of German settlers. It was not, of 
course, formed upon the lines of Owen’s plan. And it was for sale. 
He purchased it for $182,000, brought his four sons to Indiana, 
and set about bringing to reality in the New World, away from 
the commercial crystallizations of the old one, his city of the sun. 
It lasted about two years under his direction and ended in failure. 
It was in the New World, to be sure, but the settlers attracted to 
it were quite as deeply saturated with the social habits and thinking 
of the Old World as the countrymen they had left behind. Owen 
rightly attributed the failure to the fact that the men of his day — 
like the men of our own — were unprepared by education and en- 
vironment to live in such a community. He lost forty thousand 
pounds on the adventure and returned to England, no whit dis- 
couraged and with undiminished faith in the ultimate emergence 
of the new moral world of his dreams. 


But there was another cauldron in the United States when Owen 
was steaming up New Harmony — a pot out of which a very differ- 



ent brew was coming. This was Lowell, Massachusetts. Indeed, 
New Lanark in Scotland and Lowell in America must be looked 
upon as the generating plants of the forces that would grow and 
envelop our society and clash, as they do now, in a death struggle. 

Lowell was forging the weapons that the acquisitive man of the 
next hundred years would use to work his wonders. New Lanark 
was forging the moral weapons that reformers and crusaders would 
use to fight those who were armed with the predatory munition of 

On February 2, 1822, a group of New England gentlemen organ- 
ized the Merrimack Manufacturing Company. Francis Cabot 
Lowell was a graduate of Harvard. Kirk Boott had been a student 
there until he enlisted to fight in the Peninsular campaign with 
Wellington. Nathan Appleton was a graduate of Dartmouth. Their 
colleagues, Paul Moody, Patrick Tracy Jackson, Thomas N. Clark, 
and Warren Dutton were practical men. 

They selected a site for the building of a planned industrial 
town. That town was called Lowell. They built a power-loom mill 
that stands and is operated to this day. They chose the site because 
of its nearness to the Pawtucket Canal. The Canal belonged to a 
corporation that was owned by five hundred stockholders scattered 
all over New England. The Merrimack Company wanted the water 
power of the canal. So it sent Mr. Thomas N. Clark around New 
England to buy up the shares secretly. The company wanted 
machinery, and therefore arranged to get the processes and patents 
of the Boston Manufacturing Company in Waltham. The two 
companies made an arrangement “to equalize the interest of all 
stockholders in both companies by mutual transfers of stock” 
which was their way of saying the companies were merged by 
mutual exchange of shares. Indeed, here was the first corporate 
merger — the Merrimack Company, the Pawtucket Canal Com- 
pany, and the Boston Manufacturing Company — a device that 
promoters would use to blow billions in bubbles during the next 
few generations. 

The Canal and Merrimack Falls developed more power than the 



Merrimack Company needed. Also the company had more land 
than its mills and houses could occupy. Therefore, it formed a 
subsidiary — the Locks and Canals Company — with $600,000 cap- 
ital and with Major George W. Whistler, U. S. army, and father 
of James Abbot McNeill Whistler, as chief engineer. To this com- 
pany was transferred the operation of the water power and the 
construction and operation of a plant to build textile machinery. 
Thus the Merrimack Company became a holding company, own- 
ing all the stock of the Canal and Locks Company. 

Here now was an integrated vertical enterprise which, for the 
first time, spun the yarn and also wove the cloth; it built its own 
machinery; it operated its own power canal, and it would, through 
the Canal Company, take a contract to build a textile plant, stock 
it with machinery, supply the site, and furnish the power to anyone 
who wished to embark in the same business. 

It found the need for capital always urgent. It was, therefore, 
interested in an insurance company in Boston and in a bank, per- 
haps several, upon which it could draw for funds. In its numerous 
corporations, which grew in number, for it soon began to have an 
interest in other mills, it used the device of interlocking director- 
ates. And it had begun to experiment with schemes for holding 
corporation meetings at times and in places that made it difficult 
for stockholders to attend. 

It built company houses; sent a large bus around the country- 
side recruiting girls from the farms; built hundreds of boarding- 
houses managed by widows, where the girls lived. Naturally the 
little birds soon whispered in Boston tales of the goings-on of men 
and women in Lowell. A committee of ministers investigated the 
town and reported that the criticisms were unfounded, for here, 
happily, where a pious management worked the men and girls for 
eleven to thirteen hours, the creatures, in God’s own good provi- 
dence, were too fatigued at night for the sins of the flesh. It was 
a heavenly dispensation. The pious gentlemen had made the dis- 
covery that the fatigue that God-fearing manufacturers generated 
in their workers was the greatest enemy of the devil. 



In fairness to these gentlemen, it ought to be said that Appleton, 
and perhaps Boott, had met Owen, and that in their hard, New 
England way, they set up certain welfare controls. But they were 
conceived not so much in the spirit of humane consideration for 
their employees as for the purpose of maintaining order and 
efficiency. And order meant religion. Hence they established a 
church — St. Anne’s, which stands to this day. And later they built 
a Catholic church to bring the unruly Irish immigrants under some 
sort of discipline. They prohibited liquor in the boardinghouses 
and also “light and frivolous conversation.” They started a library 
and meeting places for discussions and later established The 
Lowell Offering, perhaps the first corporation house organ, edited 
by the girls. Some trace of Owen’s influence may have lingered 
here, for John Greenleaf Whittier sang of its “acres of girlhood,” 
“flowers gathered from a hundred hillsides,” “fair, unveiled nuns 
of industry,” and a local chronicler spoke of them as “troops of 
liveried angels,” which was probably laying it on thick for the 
benefit of pious Unitarian Boston. 

But the chief significance of Lowell was that it forged the weap- 
ons of the acquisitive promoter and monopolist while New Lanark 
developed the weapons of the social reformer. 

It is probably a fair estimate of the period to say that these two 
groups, added to those who had gone before — the Fuggers and 
Laws and a score of others — stocked the arsenals of the later rivals 
who would contend for the mastery of the world. The men of wealth 
now had the institution of property, the invention of money, the 
invention of credit, and, more important, the invention of bank 
credit, the corporation, the holding company, the subsidiary, the 
manipulation of corporations, speculation in corporate securities, 
the production of reservoirs of savings and the control of them, of 
bank and insurance and corporate funds — all this was ready to 
hand, this and the creation of the factory, of machinery, and of 
the techniques of management. With this the way was open for 
great numbers of ruthless and unscrupulous men to amass great 



At the same time, while philosophers and economists were fab- 
ricating the theory of individualism that created the perfect climate 
for their operations, another group, of which Owen was the great 
precursor and evangelist, was formulating the ideals and principles 
of social control in various forms, including collectivism, the the- 
ories underlying the claims of the workers, and finally the organ- 
izations through which the workers would challenge their masters 
and over many long and bloody decades wring from them one 
surrender after another. In that struggle, too, Owen was to take a 
pioneering part. 


The labor-union movement got its first important impetus in 
England in 1824, just about the time Owen departed for America. 
It would not be true to say Owen had any part in this. He had 
shown no interest in unionism or in militant organizations of 
workers to exert pressure in collective bargaining against employ- 
ers. He was not against this, but his interest was in a more funda- 
mental rearrangement of society. He conceived of a system in which 
all the producing persons, from managers down, would be united 
in a common organization. But the plight of the workers admitted 
of no such delay as would be involved in realizing this dream. 
Workers were forbidden to combine. The Combination Acts dated 
from the sixteenth century. They were strengthened at intervals. 
The latest Act, made in 1 800, forbade workmen to unite to force 
an increase in wages or reduction in hours or for other purposes, 
including pressure on another workman not to work. This law was 
rigidly enforced, and in the distress following the war jail sentences 
were invoked. Union to better the workers’ lot was called “sedi- 
tion.” But in 1824, under the leadership of Francis Place, the 
Combination Acts were repealed and labor unions became legal. 

The unions promptly united with the Radicals for parliamentary 
reform. Owenites had little interest in parliamentary reform. They 
were wrong in supposing that this was a futile step, since redress 



of the workers’ grievances required first that they have political 
power. But they were right in realizing that mere parliamentary 
reform would not of itself bring an economic cure, as the workers 
discovered quickly enough. And this led the unions in the years 
between 1824 and 1829 to seek some more specific and effective 
remedy. They wanted some direct action. And the only proposals 
in sight were those of Owen — the principles of co-operation. Hence 
in those years there sprang up an ever-widening movement for 
co-operation on the Owen model. But pending this, co-operative 
societies were organized to unite the producing and purchasing 
power of the workers for their common benefit. 

England was filled with Owenite leaders. Societies of all sorts, 
as well as the unions, journals, lectures, bombarded the British ear 
with the new cult of Owenism. And when Owen returned from 
New Harmony he was literally pushed into the leadership of this 
movement. It is an odd phenomenon in Owen’s career that he thus 
became the head and front of a movement for co-operative buying 
and selling groups, in which he had little faith, and for militant 
trade unionism, in which he had perhaps less. It can be explained, 
in a man of Owen’s uncompromising intellectual integrity, only on 
the theory that by thus going along with the workers he would 
ultimately lead them to the realization of his own dreams. And 
indeed the workers themselves were almost completely infected 
with this dream as an ultimate goal. 

There is no point here in tracing the development of the trade 
union, co-operative societies, and co-operative-village movements 
thus all intertwined. It is a long story. But what is interesting and 
important here is Owen’s attempt to establish labor exchanges 
upon a very radical model. The National Equitable Labour Ex- 
change was launched in London in 1832. It was a plan for creating 
a co-operative market with the workers as producers and buyers. 
Members could bring their products to the exchange; they could 
also buy those products. 

Most important was the means of payment. Owen had adopted 
the labor theory of value. He now conceived of labor as the stand- 



ard of value. “The average physical power of men,” he argued, 
“has been calculated; and as it forms the essence of all wealth, its 
value in every article of produce may also be ascertained and its 
exchangeable value with all other values fixed accordingly.” 

He therefore established a labor “standard” of value. He arrived 
at the estimate that sixpence was the average money value of an 
hour of labor. The value of any article was established thus: cost 
of materials plus cost of labor arrived at by multiplying hours by 
standard wage for that work plus one pence in the shilling for the 
cost of handling. The total was divided by six — sixpence being the 
average cost of labor per hour. This gave the amount of “labor 
time” incorporated in the article. For whatever this was worth, 
here was the germ of that doctrine of Marx that the use value in 
every article is the amount of socially necessary labor it contains 
or the social labor time requisite for its production. Here was an 
attempt by Owen to find a measure for that “jelly” of labor which 
is the essential value component of every article which Marx pro- 

Owen waxed enthusiastic as the unions grew in number and 
activity and he hailed the coming of the great era of co-operation. 
It took all sorts of forms, from efforts to establish villages to the 
creation of the great Builders’ Guild which became a co-operative 
construction organization owned by the workers, who also hired 
the managers. 

But all these great experiments failed. Owen’s objective, of 
course, was to use trade unionism as an instrument of socialism. 
He himself came to see that it didn’t work. He continued for many 
years with his community building and preaching the gospel of 
the New Moral World. He edited journals, wrote books, prepared 
and delivered lectures, petitioned Parliament, in support of his 
philosophies on remaking the world by education and sound moral 
ideas. He spent every dollar he had on these adventures in rec- 
reation. By the time he was seventy-three years old all his fortune 
was gone. For the rest of his life his sons, who had settled in 
America, paid him an annual income of about $1800 a year, based 



upon a fictitious debt of $36,000 that, through a carefully arranged 
but imaginary debt, they were supposed to owe him. This was 
done to spare his pride. Thus supported he went on preaching his 
doctrines in London, in Paris, in America to the end. When he 
was eighty-seven he was carried by four officers to the platform at 
a meeting in Liverpool to which he had traveled in great pain to 
proclaim once more his doctrines. When he arrived home he sank 
into unconsciousness. He recovered for a brief spell and died 
November 17, 1858. 


Cornelius Vanderbilt 



A small catboat scudding the waters of the bay from Stapleton 
to Battery Pier; at the tiller a big hulk of a youth, large-faced, 
broad-chested, blue-eyed, bursting with health and blood and self- 
assurance. This is the sixteen-year-old ferryman of Staten Island 
— Cornelius Vanderbilt — who has just plunged into business for 

Down from a line of Dutch farmers who settled in Staten Island 
in 1650, this young Corneel has been working with his father, ferry- 
ing passengers and freight in a small boat since he was ten. That 
huge engine of muscle and gristle and nerves and blood in this lump 
of a Dutch boy has come from this loutish and thriftless father. 
But the motive power in the engine, the energy, the drive, the 
arrogance, the egotism and self-assurance have come from Phoebe 
Hand, his English-descended mother, who looked with a tolerant 
pride upon this self-willed and truculent son. As for him, perhaps 
the only person he ever really cared a tinker’s damn about was this 
resolute woman who was his mother. Illiterate, boisterous, quarrel- 
some, cocksure, selfish, he was the perfect candidate for a marshal’s 
baton in the age of brigandage that was about to open in American 

He was born May 27, 1794, while Washington was still Presi- 
dent. School irked him. At ten he began to help his father, for 
whose financial adolescence he soon developed a lusty scorn. At 
sixteen he borrowed a hundred dollars from the elder Cornelius 
and bought his own small boat. 


Hr trwn Brothers 

Cornelius Vanderbilt 



What happened there in the bay is the story of what happened 
in every town in America. A group of men driving buggies or 
stages or boats; one of them with an eye on the future buying the 
hack of another and presently owning three or five and then a 
livery stable or a general store; then, little by little, as the village 
grows into a town, getting a finger in every pie— in the bank, the 
creamery, the streetcar line, the gas company, ending as the town 
mogul and despot. 

Thus it was with this sixteen-year-old boy, who would buy 
another boat and another. And presently the boats would be no 
longer small piraguas but schooners plying the Sound — blunt- 
bowed Dutch boats going up the Hudson to Albany. 

In 1813 he married Sophia Johnson, daughter of his father’s 
sister — a strange, unhappy alliance, touched with tragedy that 
flowed directly out of the ruthless, imperious nature of that loveless 
husband. He was not the man to tie his heartstrings around anyone 
or anything — wife, children, or country. When he tired of this 
woman he put her in a lunatic asylum. As for his country, he lived 
to be eighty-two and in all that time he voted but twice. His religion 
was a simple creed of his own forging in which the deity was 
Cornelius Vanderbilt. 

In 1817, at the age of twenty-three, he had amassed a tiny 
fortune of nine thousand dollars and three good schooners. At the 
end of that year he decided to sell the boats and make a new start. 


In the early months of 1818 a small steamboat — the Mouse of 
the Mountain — was putting in regularly at Battery Pier. Her skip- 
per was Captain Cornelius Vanderbilt. He had gone up in the 
world — and down, Nov/ he commanded a steamboat instead of a 
mere sailing vessel. But it was another man’s, not his own. He was 
getting a thousand dollars a year salary instead of the three or four 
thousand he had made as his own master. But the important point 



to young Captain Vanderbilt was that now he was moving under 
steam power. 

Robert Fulton had sailed his Clermont up the Hudson in 1807. 
Vanderbilt had watched with contempt the steamboats that plied 
the river. A man without vision, a know-it-all, he knew with the 
certainty of ignorance that steam would never supplant sails. But 
by 1817, facts — existing facts as distinguished from dream stuff 
and visions — were under his very nose. If he could not dream he 
could act. So he abandoned canvas for the steamboiler, even 
though it was impossible for an independent to go into the steam- 
boat business — impossible because Fulton and Livingston had a 
monopoly of it. 

Robert Fulton and Robert Livingston owned Fulton’s steamboat 
invention. They were not content with this, however. Livingston 
was Chancellor of New York State and a political power. He had 
got from the legislature a monopoly for the firm for the operation 
of steam vessels in the waters of New York State. 

Aaron Ogden was Governor of New Jersey. He got the franchise 
from the monopoly to operate steamboats between New York and 
Philadelphia, including New Jersey ports. 

Thomas Gibbons, of Elizabethtown, operated several small 
steamers between New Brunswick and a point connecting with 
Ogden’s line. The monopoly declared that because Gibbons fed 
Ogden’s line, he must pay royalties to the monopoly, even though 
he operated wholly within New Jersey. Gibbons refused. Instead 
he launched with one of his vessels a line between New Brunswick 
and Battery Pier, New York City. Thus he challenged directly 
the monopoly. Ogden, backed by the monopoly, went to court and 
sought an injunction against Gibbons. The eminent Chancellor 
Kent granted it. It was this Gibbons boat — the Mouse of the 
Mountain — that young Cornelius Vanderbilt was commanding in 

Vanderbilt had decided to go in for steam navigation. But it is 
characteristic of monopoly that newcomers cannot enter the trade 
it rules. And though newcomers are essential to the capitalist 



economy, its defenders for decade after decade have made it more 
and more difficult for newcomers to arrive, until in this year of 
grace in which I write it is all but impossible. 

Vanderbilt had to look for a job with someone who had a boat. 
He picked Gibbons., He swapped the role of proprietor for that of 
employee in order to learn about steam. Thus he found himself 
jammed in the very center of the first great monopoly battle in 
America — and against monopoly. Vanderbilt, of all men, born 
monopolist! He was the very man for Gibbons. He had a reputation 
on the water front as its boldest, most warlike and formidable 
battler. He united the untamed truculence of the ruffian with those 
more terrifying qualities — an eye that blazed with resoluteness 
and wrath, a Jovian countenance, and a huge, loose-jointed body 
and ready fists. He was the sort of man who might have stood on 
the quarter-deck of a pirate ship and quelled a mutinous crew with 
his commanding anger. He had whipped every blackguard on the 
river front. He loved a fight. Gibbons was in a fight. Vanderbilt 
needed an education in steam navigation. And the deck of the 
Mouse of the Mountain was the school for him. But it must have 
irked the man who called his first schooner the Dread to be com- 
manding a vessel called the Mouse. Vanderbilt induced Gibbons 
to rehabilitate the slattern craft and rechristen her the Bellona. 

Vanderbilt’s reputation as a manager rose rapidly. The condi- 
tions in which he operated the Bellona were difficult. The captain 
and his craft were pursued by process servers and sheriffs for 
months, while the litigation lasted. But he managed to evade them, 
keeping the Bellona in service despite the Chancellor’s injunction. 
Meantime Gibbons had taken his case to the Supreme Court of 
the United States. And there he won it. The case of Gibbons vs. 
Ogden is one of the great landmarks of constitutional history. 
Chief Justice Marshall held that the United States government 
alone had the right to regulate traffic in the navigable waters of 
the nation. If, said Marshall, the Federal government did not have 
the power to regulate so essential a function then the Constitution 



would become “a magnificent structure, indeed, but wholly unfit 
for use.” 

The way thus cleared, Vanderbilt, year after year, extended 
Gibbons’ line. He added boat after boat. If he did not have vision 
for perceiving the shape of things to come, he displayed magnificent 
talents as a manager of things as they were. He was now manager 
of the Union Line, as Gibbons’ enterprise was called. He had an 
office at 457 Washington Street. And there, in an atmosphere of 
violence and blue profanity that made even the sailors wince, he 
roared orders at his employees and abuse at his rivals. He revealed 
here that quality which marked the brigand money getters of his 
day, an utter incapacity to envisage any reason against doing what 
he wanted to do. If men objected he brushed them aside. If they 
fought back he knocked them down. If laws intervened, why, they 
were damn-fool laws and not fit to be noticed. If officials blocked 
the way, why, buy them. If judges issued decrees, why, see that 
the decrees were on his side. Those who disagreed with him were 
blockheads. Those who resisted him were — -why, Goddamn theml 
— they were hypocrites and blackguards and public enemies. This 
was the code with which he operated to expand the nine thousand 
dollars he had amassed as a ferryman to a hundred million before 
he died. 

When Vanderbilt took his job with Gibbons he moved his family 
to New Brunswick. There his wife took over an old inn, renamed it 
Bellona Hall, and ran a tourists’ tavern. Like himself she was 
illiterate; unlike him she was without ambition. She was an effi- 
cient drudge whose objective did not extend beyond making a go 
of Bellona Hall. But that she did. She scrimped and saved and 
slaved and bore to her husband with amazing regularity a flock of 
children until there were twelve. Vanderbilt saw little of them, 
thought less of them, indeed scarcely knew them. His home was on 
the bounding waves and in the little office in Washington Street 
where he too slaved sleeplessly. He looked upon his wife and her 
brats as hopelessly inferior to the expanding and altogether ad- 
mirable figure into which he saw himself growing. 



The Union Line was making $40,000 a year for Gibbons. Van- 
derbilt was not the man to go on making $40,000 a year for another 
man when he could do it for himself. The nine-thousand-dollar 
capital had by 1829, what with his earnings and those of Bellona 
Hall, swelled to thirty thousand. In that year Vanderbilt — thirty- 
five years old — went to Gibbons and, to that gentleman’s horror, 
informed him he was quitting. He shut up Bellona Hall amid his 
wife’s tears, moved his family to a small tenement in Stone Street 
in Manhattan, and once again went into business for himself. 


Vanderbilt bought such boats as he could. He got some from 
Gibbons. He plunged into his enterprise with all his boundless 
vitality. He succeeded from the first. He succeeded because he was 
a manager of the highest ability. He grew rich fast. In the first five 
years he made thirty thousand dollars a year. The sixth year he 
made sixty thousand. He never made so little again. He built up a 
network of steamboat lines that covered all the ports of Long 
Island Sound and New York Harbor and extended to Bridgeport, 
Newport, New Haven, Providence, and Boston. Before he ended 
this episode of steamboating he owned a hundred vessels and was 
worth millions. 

He was a ruthless competitor. He had two principal weapons — 
superior service and rate cutting. He drove weak competitors from 
the water. He threw his strength with abandon against the 

He put a boat on the Hudson River. And here he first met that 
sinister man who was to be his foe in every business he attempted. 
You have to go to the pages of a novelist like Dickens for such a 
character as Daniel Drew. He was a compound of coarseness, 
illiteracy, vulgarity, meanness, dishonesty, and hypocrisy. He had 
risen through the levels of canvasman, animal trainer, clown in a 
circus, drover, keeper of the Bull’s Head Tavern on the Boston 
Post Road and Twenty-sixth Street, to steamboating, speculating, 



banking, and railroading, battling Vanderbilt on every stage of this 
long ascent. He looked upon cards, the bottle, the theater, and 
dancing as things of the devil. But lying, duplicity, thievery, and 
greed were the passions of his life. Somewhere in the dark corners 
of his soul he worshiped some strange version of the Christian 
God, but there was no form of perfidy to which this vulgar old 
Goth could not descend with a pious ejaculation upon his tobacco- 
stained lips. 

Vanderbilt started a rate war on the Hudson with Drew and 
drove him from the river. He tackled a much more formidable 
combination — the Hudson River Association — backed by the 
power of the Van Buren machine and led by Dean Richmond, with 
whom also he was to cross swords upon other battlefields. He could 
not drive them from the river. But with a rate war he could inflict 
heavy losses on them. They offered him terms, and for a considera- 
tion he agreed to quit the Hudson River route. 

Soon Daniel Drew was back on the Hudson with a sensational 
vessel, the Isaac Newton, first of the great floating palaces, 300 
feet long and with berths for 500. Vanderbilt promptly returned 
with an even more luxurious boat, the Cornelius Vanderbilt. “Live- 
oak” George Law, another lifelong antagonist of Vanderbilt, en- 
tered the lists with the Oregon. Which was the faster — the Oregon 
or the Cornelius Vanderbilt ? That was a river bet until Captain 
Vanderbilt and “Liveoak” George agreed to fight it out. They ran 
a race as famous then as the great race between the Robert E. Lee 
and the Natchez years later. And Law’s Oregon beat the Cornelius 
Vanderbilt, to the great disgust of the Captain. These two men 
were to meet many times again in more deadly struggles. 


During these years Cornelius Vanderbilt had been expanding 
personally. By 1849 he was forty-five years old. Yet he had 
scarcely begun his career. He had moved his family, of course, 
from the Stone Street tenement to a larger house on Madison 



Avenue and then to a still more commodious one at 173 Broadway 
and then, at the insistence of his wife, to a stately home and farm 
on Staten Island. And by 1845 he built a splendid residence, at 
No. 10 Washington Square, in keeping with his stature in the 

He had been promoted. It was a time when many a commanding 
figure was found in Broadway. Men made up for their parts, with 
their whiskers and frock coats, their cloaks and high hats. But 
there was no more commanding figure there than this frock-coated, 
high-hatted, side-whiskered Jove, tall, erect, alive, past forty but 
moving with the stride of a younger man. It was ridiculous to go 
on calling this imperious person merely Cap’n. So men began to 
call him Commodore — and Commodore he remained. Time had 
softened very little the bucolic curves of his accent or the illiterate 
forms of his grammar. He was not a man to look himself over for 
defects. He remained to the end a thoroughly ignorant man — 
ignorant of everything save his business. 

During these years there were terrible divisions in his family 
which would have destroyed a more sensitive man, save that they 
could not have happened to a sensitive man. He cared little or 
nothing for his children. One of them had to be committed to an 
insane asylum. His son William H. married, but was forced to 
retire to a New Dorp farm to regain his health. Nothing could have 
seemed to the virile Commodore surer evidence of weakness in a 
man’s character than a loss of health, and so he looked with con- 
tempt upon this febrile son. 

Most serious was the dark gulf that widened between himself 
and his wife. He was a heartless man. She was a weak woman. 
She wept and seemed forever dissatisfied. Her health broke down. 
She declined into fits of melancholy, due partly, beyond doubt, to 
her physical infirmities but also in part to certain escapades of the 
full-blooded Commodore that preyed on her mind. She whimpered 
against moving back to Manhattan to the stately home being built 
on Washington Square. They quarreled. The quarrels split the 
family. And in the end Vanderbilt said she must be crazy. To sus- 



pect it was to conclude it, and, against the protests of her daugh- 
ters, he put her into a Flushing insane asylum. Members of his 
own family charged that he did it to make way for some other 
woman. It is a dark chapter in his life. It opens a crack in his shell 
through which we may have a peep at the ruthless soul within. 
The unfortunate woman remained in the asylum for two years, 
after which, under pressure of his family, he permitted her to come 
home. This was in 1847. Two years later he made up his mind 
that he was done with steamboats. He turned his mind to other 


In 1849 gold was discovered in California. Thousands flocked 
to the coast. They went by covered wagon, and by clipper ships 
around the Horn. Vanderbilt’s old Hudson River foe, “Liveoak” 
George Law, along with Albert G. Sloo, Marshall O. Roberts, and 
others, organized the United States Mail, while Harris and others 
formed the Pacific Mail Steamship Company. The first was called 
the Sloo Line; the second the Harris Line. The Sloo ran from 
New York to what is now Col6n. Its passengers were sent across 
the Isthmus of Panama, where the Harris Line took them to San 
Francisco. The trip cost $600 first class and $125 in the steerage. 
It was expensive but it was the quickest and most comfortable 
route to the Land of Gold. The ships received juicy mail subsidies 
and the companies were getting rich. Vanderbilt decided to enter 
this trade. He planned to send passengers to Nicaragua by steam- 
ship instead of to Panama, across Nicaragua by canal, and then 
by ship to San Francisco. It would be shorter and he knew he could 
manage ships better than Sloo and Law. He went to England to 
get financial aid and met with refusal. But he was not daunted. 
He established the ship line from New York to Nicaragua and from 
Nicaragua to Panama. He sent his passengers across the narrow 
isthmus by steamboat on the San Juan River into Lake Nicaragua 
to Virgin Bay. Then they went over the twelve miles to San Juan 



del Sur, on the Pacific, by stage. He operated eight ocean-going 
ships in the Atlantic and Pacific and ran twenty-five handsome 
blue and white coaches over the isthmus connection. He could beat 
the Harris and Sloo lines by two days. And, in spite of their subsi- 
dies, he could carry passengers for $300 instead of $600 and make 
money. Steerage passage he cut from $125 to $35. He took two 
thousand passengers a month to California from New York and 
New Orleans, transported much of the gold, and made a million 
dollars a year. By 1853 he boasted to a friend that he was worth 
eleven million dollars. 

This line to California he called the Accessory Transit Com- 
pany. He sold stock in it, keeping merely enough to control it, less 
than a majority. In 1853, when all was running well, he went to 
Europe on an extended vacation with his family. He confided the 
operation of the Transit Company to the banking firm of Garrison, 
Morgan, Rolston, and Fretz. While he was away Morgan and 
Garrison quietly bought up enough stock to get control. When the 
old buccaneer returned he found that he had been boarded and 
scuttled. In a towering rage he wrote Morgan and Garrison a letter 
that is a model for brevity and meaning: 

Gentlemen: You have undertaken to cheat me. I will not sue you 
because the law takes too long. I will ruin you. Sincerely yours. 

He did not ruin them. But he did go quietly about buying up 
enough stock to regain control of the line. Then he threw them out. 

He was to find the road to quick millions strewn with enemies. 
Hardly had he settled with Morgan and Garrison when he was 
confronted with a revolution in Nicaragua. A dashing young 
American filibuster, William Walker, overthrew the government 
and seized and revoked the Transit Company’s charter. Such a 
crisis called forth Vanderbilt’s natural ability as a general. He 
stopped all his vessels en route to Nicaragua and thus cut William 
Walker off from communication with America, whence he was get- 
ting men and supplies. Walker got himself elected President. 
Instantly the neighboring Central American “republics” were out- 



raged. Vanderbilt armed and financed Costa Rica, Honduras, 
Guatemala. They poured hostile troops into Walker’s new empire. 
He organized a filibuster under two notorious adventurers. He re- 
ceived aid from Buchanan. He drove Walker into a corner until 
he surrendered to a United States gunboat. 

He got his Transit Company back. But by this time he was ready 
to quit Central America for other fields that looked greener and 
less troublesome. 

His natural sense of justice based on its relation to the interests 
of Commodore Vanderbilt had been profoundly disturbed by the 
immense subsidies Harris and Sloo and Law were getting from the 
government — $900,000 a year since 1848. He thirsted for that 
money and had a vision of the means to get most of it. Having 
slashed the rates on his rivals, he had devoured most of their 
profits. He went to them and proposed that he would withdraw — 
but they must make it worth his while. He had done the same thing 
before to Dean Richmond when he fought the Hudson River Asso- 
ciation. He forced Harris and Sloo to buy his boats at a good price 
and to pay him $40,000 a month as long as he kept out of that 
trade. A little later, by a threat to return, he compelled them to 
raise the price to $56,000 a month — $672,000 a year. He got all 
his investment back and drew $672,000 a year, most of the subsidy, 
without lifting a finger. He drained most of the subsidy away from 
Law and his colleagues and let them do all the work and supply 
all of the capital. 

Then he built two magnificent vessels — the Vanderbilt and the 
Ariel — and entered the Atlantic trade, running his ships to South- 
ampton, Bremen, and Havre in competition with E. K. Collins. 
He has been accused of being in a conspiracy with Collins to extort 
subsidies from the government. But there is no proof of this. He 
found there was no profit in this business. With all his capacity 
as a manager and his willingness to work men for the lowest wages, 
he discovered he could not compete with the Cunard Line which 
paid still lower wages and enjoyed large subsidies from the British 
government. And so the old Commodore, a multimillionaire, second 



in wealth only to John Jacob Astor, sixty-six years of age, bade 
good-by to the sea, but not to retire. He sold his ships to Allen and 
Garrison for $3,000,000 — all but the North Star. And that calls 
for a word. 


In 1854 Vanderbilt built a magnificent vessel that he named the 
North Star. Whether this was primarily an ocean liner or a private 
yacht is not quite clear. It was certainly fitted out at first as a 
private yacht. But it was a ship of 2500 tons and almost as large as 
the largest transatlantic liners then in service. 

In the early summer of 1854 Vanderbilt astonished New York 
by putting the elegantly appointed North Star into service as a 
private yacht. Into this Ark de luxe the skipper loaded his wife and 
his twelve children, a famous captain, and a fashionable chaplain. 
The chaplain wrote a book about this pretentious expedition, 
called The Cruise 0} the Steam Yacht North Star: A Narrative 0} 
the Excursion of Mr. Vanderbilt’s Party to England , Russia, Den- 
mark, France, Spain, Italy, Malta, Madeira, etc., by the Rev. John 
Overton Coules, D.D. The old Commodore literally knocked Lon- 
don’s eye out. He was feted by the Lord Mayor. He and his wife 
rode around St. Petersburg in the Czar’s carriage. 

This was the vessel he reserved when he sold all his others to 
Allen and Garrison. It happened in 1859. The next year the South 
seceded and Vanderbilt, in a gust of patriotism, offered the North 
Star to the government. He intended it as a loan. The government 
went him one better and accepted the gift. Hell and damnation! 
Gift! He had made no gift. But this painful error put him in an 
embarrassing position and so he had to absorb the loss with the 
best face possible. But the mistake was to stand him in good stead 
later. When a country goes to war or is ravaged by a plague, there 
are always men whose first question is: what can I make out of 
this? The whole prewar era was one of vulgar dishonesty. It was 
not surprising, therefore, that men who had materials to sell or 



who understood the delicate mechanism of speculation should have 
sunk their hooks deeply into the public treasury while the rest of 
the country fought and suffered. It is a dark and sordid story. 
Vanderbilt managed to get himself smeared with some of this 

The government planned in great secrecy an expedition to New 
Orleans under General Banks. It needed vessels to transport horses 
and men. Secretary Stanton asked Vanderbilt to look after the 
purchase of the needed vessels. Later an ugly scandal broke out 
about these purchases, which led to a Congressional investigation 
and an acrimonious debate in the Senate. The main charges were 
fully substantiated. Men who had vessels to sell were compelled 
to pay from five to ten per cent commission to Vanderbilt’s agent, 
T. J. Southard. Old, outmoded, and even rotting ships were un- 
loaded on the government at extortionate prices. Vessels utterly 
unfit for ocean service were rented at rates shockingly in excess of 
prices paid for the same boats in similar expeditions. 

A resolution censuring Vanderbilt, his agent T. J. Southard, and 
Commodore Van Brunt of the navy was introduced in the Senate. 
The question was — did Vanderbilt know that Southard was taking 
this money? Was he personally aware of the nature of the vessels 

It is fair to say, notwithstanding some of the bitter excoriations 
of Vanderbilt, that no evidence was produced to prove that he 
knew that Southard was grafting, although the latter’s guilt was 
established — he even offered to return the money. What Vanderbilt 
was guilty of, however, beyond doubt, was shameful negligence and 
incompetence. He did approve the buying of boats at prices which 
he knew better than anyone else were indefensible. He most cer- 
tainly bought and hired craft without reasonable inspection. His 
excuse was that they were adequately insured, to which Senator 
Tombs of Georgia replied that surely insurance could not cover 
the lives of the men committed to some of these rotten hulls. He 
did know that Southard had bought for the government some of his 
own boats at even higher prices than those paid for any others. 



The whole transaction smelled of fraud. And had Vanderbilt been 
a man with a finer sense of public service it could not possibly have 

His name was expunged from the censuring resolution and it has 
been charged that he used political influence to effect this. But 
certainly that left-handed “gift” of the $800,000 North Star went 
a long way to save him from the branding iron of the Senate. 


When Vanderbilt sold his ships it was not to retire. He aban- 
doned the sea for railroads. He was no pioneer. He was in no sense 
a man of vision. Other men dreamed. He went into action after 
their dreams had materialized. When he operated his schooners, 
he sneered at the steamboats that Fulton and Livingston and other 
men of vision were running. When he adopted steam he laughed 
with scorn at the little iron horses that puffed along the Hudson. 
He went into the Isthmian-California traffic after Sloo and Law 
and others had shown the way and the profits. In i860 railroads 
were no longer experiments. He had no time for experiments. But 
he could see that they were potential money-makers and that the 
men who were running them were doing a bad job of operation. 

One fable linked with the Vanderbilt saga is that he took a great 
number of little jerkwater roads and forged them into the great 
New York Central trunk line. The legend is overwrought. By i860 
the New York Central was an integrated line running from Albany 
to Buffalo. The work of consolidation had been nearly completed. 
Originally the traveler from Albany bound for Buffalo had to start 
on the Albany & Schenectady to Schenectady. There he changed to 
another road — the Schenectady & Utica — for Utica. At Utica he 
boarded another road for Syracuse. At Syracuse he scampered out 
again for another stretch on another road to Auburn. There he 
boarded the Auburn & Rochester for the latter city. And then, 
with a sigh of relief, he got a ticket on the Rochester, Lockport & 
Niagara Falls for Buffalo. In 1852 all these small roads, plus some 



more enjoying unused franchises, were consolidated into a single 
line called the New York Central. Then the management boasted 
that a man — after a sleepless night from Albany to Utica — might 
eat his breakfast in Utica, dine in Rochester, and sup with a friend 
on the shores of Lake Erie. As for the beginning of it all, the man 
who dreamed the dream was an aristocratic old gentleman named 
George W. Featherstonhaugh, who made the start with the first 
road from Albany to Schenectady when Vanderbilt was haw-haw- 
ing at the stupid fellows who thought they could make those dern 
things work. Most of the consolidating occurred when he decided 
to transfer his talents to steam. 

He began, however, not with the Central but with two roads 
running out of New York to Albany — the New York & Harlem, 
and the New York & Hudson River. First he bought a controlling 
interest in the Harlem road. Its downtown terminus was at Tyron 
Square back of City Hall. Its cars were hauled by horses to 
Twenty-sixth Street where the locomotive was hooked on. Then it 
proceeded to Chatham where it connected with the Boston & Al- 
bany for the capital city. Like most early roads, it was misman- 
aged. In twenty-nine years it had averaged less than half of one 
per cent a year profit. Its road and equipment were badly run 
down. Vanderbilt bought control at nine dollars a share. 

The Commodore’s next step was to get for the Harlem road from 
the Common Council a perpetual franchise to extend its right of 
way down to the Battery. Out of this incident grew an unlovely 
comedy of duplicity, treachery, and fraud scarcely duplicated in 
our turgid business history. 

While Vanderbilt sought his franchise from the Council, George 
Law — he of the Hudson River Line and the Panama episode — 
sought a similar one from the legislature. Vanderbilt bribed the 
corrupt Council known as the Forty Thieves. Law bribed the 
equally corrupt legislature’s dominating group known as the Black 
Horse Cavalry. Vanderbilt got his franchise, Law got his, but 
Tweed’s governor vetoed it at Vanderbilt’s urging, doubtless imple- 
mented by cash. The stock of the Harlem shot up in price. 



But Daniel Drew, who is entitled to a high place in American 
business’ Hall of Infamy, entered into a conspiracy with the Coun- 
cil. Drew showed them how they could make a lot of money by 
betraying the old Commodore whose cash they had taken to give 
him the franchise. The members were equal to any infamy. The 
North American Review about this time described this august 
body as being made up of “pickpockets, prize fighters, immigrant- 
runners, pimps and the lowest of liquor dealers” to the “absolute 
exclusion of honest men.” Under Drew’s leadership they formed 
a pool to sell the Harlem stock short. That is, as the stock rose in 
price they would sell — stock they didn’t have, of course — for 
future delivery. Then if the courts held the franchise to be unlaw- 
ful, which was more than probable, the stock would promptly go 
down in value. If the courts did not hold it illegal the Council 
could revoke the franchise they had voted to Vanderbilt for bribe 
money. When the shares sank in price, Drew could buy cheaply 
all the shares he needed to make delivery to those who had bought 
at high prices. 

The stock went to ioo. Drew sold heavily as planned. But some- 
how the stock did not sink in price. Drew continued to sell in order 
to hammer the price down. But instead the price went up— to 120, 
to 150, to 170. Here is what happened. Vanderbilt got word of this 
conspiracy. Therefore, as fast as Drew sold Vanderbilt bought. 
It was, indeed, Vanderbilt who was buying all the stock Drew was 
selling. Presently Vanderbilt owned practically all of the 1 10,000 
shares of the Harlem and the thousands of fictitious shares Drew 
had sold. Then he called upon Drew to make delivery of those 
shares. This meant Drew had to go out in the market and buy. But 
there was none for sale. Vanderbilt had it all. Drew had to buy from 
Vanderbilt. He went to his old enemy and begged for mercy. Van- 
derbilt turned the screw and compelled him to buy thousands of 
shares at $1 79. It cost Drew and his aldermen colleagues a million 
dollars in losses. It was nearly enough to make up for what Van- 
derbilt had paid for his control of the road. But he had lost the 



Next he bought control of the New York & Hudson River, the 
river route to Albany and much the better line. Then he asked the 
legislature to authorize the consolidation of the Harlem and Hud- 
son River roads. The Black Horse Cavalry had to be bought again. 
Here again the legislative leaders attempted to carry off a short- 
selling coup like that tried by Drew and the Council. They planned 
to defeat the act at the last minute and cover as the Hudson price 
sank down. But once again Vanderbilt duplicated his offensive 
against Drew. He found himself in possession of 27,000 shares 
more than existed. He compelled the legislative gamblers to settle 
at $285 a share and boasted with glee that he “had busted the 
whole legislature.” He got his act, merged the two roads, and then 
turned to getting the New York Central. 

In the Harlem and Hudson operation he did not so much join 
two roads as he did put one of them out of business. He began to 
build up the Hudson River route, double-tracking it, erecting new 
stations, and providing new equipment including the new sleeping 
cars. Everywhere the effects of new and capable management were 

Getting the Central was not easy. It was in the hands of tough- 
fibered men, with plenty of money — John Jacob Astor, John 
Stewart, and others, led by Dean Richmond, who had fought Van- 
derbilt with the Hudson River Association when Vanderbilt made 
him pay him to quit the Hudson for a while. Moreover, the Central 
had been shamefully overcapitalized. Its various component roads 
had cost $1 1,000,000 to build. But the capitalization was raised to 
$23,000,000 and at the consolidation to $35,000,000 — sixty per 
cent water. 

But Vanderbilt was a general of formidable talents in such a 
fight. He had driven old Drew from the field in a swift tactical 
maneuver and repeated it later against the corrupt leaders of the 
legislature, with that kind of swift decision with which he coun- 
tered Walker’s filibuster seizure of the Transit Company in Nica- 
ragua and that sort of shrewd strategy with which he managed to 



make the Sloo and Harris lines fork over to him most of their rich 
subsidies from the government. 

The Central had one weakness. It could get its passengers from 
Buffalo to Albany, but had no means of sending them to New York 
save over the Hudson River road in the winter and by the Hudson 
River steamers in the warm months. Vanderbilt had begun to buy 
stock in the Central, but when he found he could not get control 
he took swift and sudden advantage of this weakness. When the 
fall months ended and ice filled the river, the Central ordered the 
shift of its New York passengers and freight to the Hudson River 
line. But when the passengers got out of the Central trains, there 
were no Hudson River trains to receive them. Vanderbilt had or- 
dered that the Hudson trains should not only not cross the river 
to meet the Central but should stop a mile away from their usual 
station. The Central passengers had to troop in the snow to their 
New York connection. The freight had to be hauled by drays, add- 
ing immensely to the cost. 

The Central managers denounced him. The public joined the 
protest. The legislature ordered an investigation. It summoned 
Vanderbilt and asked him why he had failed to send his trains 
across the river. He bowled them over by producing a state law 
prohibiting his company from sending trains across the river. That 
settled that. But why had he stopped his trains a mile away on his 
own side of the river? He didn’t know. He didn’t give the order. “I 
was home,” he said blandly. “I was playing a rubber of whist. 
And ye know, gentlemen, I never allow anything to interfere with 
me when I’m playing cards. Ye got to keep your attention fixed 
on the game.” 

Backed by the law, he held his ground. It was a costly strike 
against the Central. And in 1857 the stockholders compelled Rich- 
mond, Astor, and Stewart to surrender. They called Vanderbilt in 
and made him President. He began extensive improvements on this 
road too, and in two years asked the legislature to permit the join- 
ing of the Hudson River and the Central. This was his only merger 



of roads in that continuous trunk line that he called the New York 
Central & Hudson River road. He increased the stock from 
$44,000,000 to $86,000,000. Each holder of a $ioo share got a share 
in the new company for $180. The eighty dollars was pure water. 
As for Vanderbilt himself, he got for himself and his services six 
million dollars in cash and $20,000,000 in shares, in addition to the 
water he got on his own shares. Thus he embarked upon that 
vicious and socially disastrous practice that was to be the curse of 
American business to this day, of inflating the capitalization of 
railroads, utilities, and corporate enterprises of all sorts. 

— . vm 

There is a curious notion that enjoys much popular support in 
this country. It might be called the brigand theory of progress. A 
certain kind of lusty scoundrel, audacious, adventurous, taking 
bold chances, not putting too nice a point upon questions of right 
and wrong when it is a question of getting things done, is supposed 
to be essential to business progress. 

Such men do wicked things by the code of the casuist. They 
engage in enterprises that involve fractures of many command- 
ments. They enforce losses upon smaller men. They are cruel. We 
need not condone all this. But we are told that we must recognize 
that these are blemishes among many greater qualities. Indeed, 
these very vices are but the by-products of the exuberant energy 
which is essential to pushing forward great projects. They are 
driven by a passion for doing things. And in a world of timid souls 
and doubters, of human obstacles of every sort, of stupid laws and 
venal officials and selfish interests balking progress, men of tough 
fiber are needed to cut through all the physical and human fort- 
resses that block them. Some people suffer, some lose as a result 
of their methods, but out of their efforts emerge great works and 
great institutions. 

This precious gem of social philosophy is worth assaying. But 
at least this we may observe: at the period of which we are writing 



there appeared as fine a collection of rascals materializing railroads 
and other works through the processes of the brigand theory of 
progress as ever were to be found on the Spanish Main itself. 
Whether or not they were driven by a passion for getting things 
done, certainly they were driven by a consuming passion for getting 
other people’s money. Whether the passion for achieving great 
works was stronger than the appetite for money, we may judge 
from the manner in which Commodore Vanderbilt ditched his 
Panama project in favor of a scheme under which he could wring 
$56,000 a month out of his opponents without all the trouble of 
operating a project. 

Jay Cooke, banker, planned to build the Northern Pacific with 
money furnished by bond buyers while he and his colleagues took 
the stock and the ownership and control without putting up any 
cash (or only a trifling sum) and then got the government to give 
them an empire in land grants — 44 million acres. Cooke ruined 
himself and his investors, plunged the nation into a panic, and 
doubtless delayed the building of the road for years. Then another 
group reorganized it, took 49 million shares of stock for themselves 
for which they paid nothing. In later years, when the road needed 
$11,000,000 in additional capital, another great banking firm sup- 
plied it from its clients and in return loaded the company with 
$58,000,000 in securities. 

The Union Pacific was marked by a similar trail of failures, 
delays, corruption, and theft, including the infamous Credit Mobi- 
lier, which bribed members of Congress and its Speaker, governors, 
editors, judges, and a candidate for the presidency. To build a 
railroad? No, to build the crooked capital structure by which they 
could exploit it. They made a contract between themselves and the 
roads to do the construction work and put in the way of the great 
project that most terrible of obstacles — prohibitive costs due to 
their own extortionate charges. 

That other precious quartet of railroad titans — Charles Crocker, 
Collis P. Huntington, Leland Stanford, and Mark Hopkins — who 
built the Central Pacific, issued to themselves $33,000,000 in bonds 



and $49,000,000 in stocks in return for practically no investment 
and as representatives of the roalroad made a contract with them- 
selves as builders to construct the road and charged the com- 
pany three times the $27,000,000 it cost to build. 

The proceedings of Messrs. Vanderbilt, Drew, Law, and others 
in the Harlem and Hudson River franchise and corners offer an 
excellent instance of the skulduggery to which these gentlemen 
resorted, not to build railroads, but to grab roads already built. 
The railroads, like the utilities, are a gift to us from countless 
devoted scientists who created the instrumentalities that make 
up a railroad, and of countless industrious operating engineers 
who dreamed them, built them, and later managed them all for 
very meager rewards, while the work of driving forward railroad 
development was actually hampered by the scoundrels who used 
the financial necessities of the roads to exploit them, rob their 
stockholders and bondholders, debauch their communities, and, 
in the end, ruin the roads themselves. 

Indeed this whole matter of brigandage is a bit elusive. It is 
not always easy to know where the outlaw ends and the baron 
begins. One cannot detect with accuracy the moral boundaries 
that divide the pirate from the privateer and both from the rack- 
eteer and the promoter. 

There is the outlaw — the man on the horse or sailing under 
the Jolly Roger, who defies society, denies its laws, and makes war 
on it — like Captain Kidd. 

There is the racketeer who remains in society, scoffs at its 
laws, but assumes control of some of its operations and func- 
tions — like A 1 Capone. 

There is the financial promoter who uses neither horse nor 
galleon, who does not defy laws but rather shapes them to his 
ends, does not make war upon society but corrupts its officials, 
adopts and exploits its machinery — like Jay Gould. 

But all have the same objective — plunder. And all exist, where 
they do exist, because of a tolerance of them that persists as a 
strange anachronism in civilized society. It must not be forgotten 



that Henry Morgan was knighted not before he went astray as 
the most ruthless buccaneer of his time, but after. In a life of 
crime under the license of a privateer he assaulted and sacked 
one island after another, ending with his savage attack on Panama, 
where he burned the castle and the town and marched away with 
175 mules and cattle loaded with treasure worth over a million 
and a half and 600 prisoners who were held for ransom. He de- 
frauded his men and returned to England where he was knighted 
and appointed governor of Jamaica by Charles II. 

We have conferred doctorates, positions of honor, built monu- 
ments, named streets and institutions after some of our own 
freebooters who were scarcely better than Sir Henry Morgan. I 
can explain it upon no other theory than that we are as yet but 
very imperfectly civilized. Our people as a whole have only a very 
rudimentary perception of the more subtle social virtues. They 
can understand and applaud only a few very rudimentary human 
virtues. They understand strength, courage, loyalty, generosity. 
Therefore, they can admire the political district leader who will 
fight at the drop of a hat, who always overcomes his enemies, 
who distributes largess to the poor and sticks to his friends. That 
he may rob the city, betray his official trust, accept bribes from 
the predatory enemies of the poor, mismanage and bankrupt the 
community is of no importance since these performances involve 
the exercise of social virtues and vices that they perceive but 

How thin this line between the freebooter and the magnate 
may be, one may see in the following account of one of the most 
amazing episodes in American business history. 


The Erie Railroad runs from New York to Buffalo and on to 
Chicago. It competed in 1866 — and still does — with Vanderbilt’s 
New York Central. The poor old Erie had a long history of cor- 
ruption and mismanagement. One group of directors after another 



had looted it. The road was organized in 1832 with a capital of 
$4,000,000. The state of New York put up $3,000,000; private 
investors the other million. The state got bonds; the private 
investors got stock. The state never received a penny of interest 
or principal on its bonds, and after ten years these were canceled. 
Another issue of $3,000,000 in bonds and $3,000,000 in stock 
was put out, and the Erie began another decade of mismanage- 
ment. By 1857 it was again in the hospital. At this point Daniel 
Drew, then a banker and broker in Wall Street, entered the pic- 
ture. He loaned the road $3,480,000. It couldn’t meet the loan so 
Drew took it over. For eight years thereafter it almost ceased to 
be a railroad and became a mere tool in the Wall Street kit of 
Drew, who ran its stock up and down at will and made millions 
out of gullible speculators. 

Vanderbilt saw the possibilities of the Erie. Moreover, it com- 
peted with the Central. He determined to add it to his posses- 
sions. He began buying shares secretly. He accumulated 20,000. 
This was not enough. But John S. Eldridge of Boston controlled 
a large block of stock. A Boston group that he represented wanted 
to bring about a consolidation of the Erie with their Boston, Hart- 
ford & Erie. Vanderbilt induced Eldridge to unite with him, pool 
their shares, and seize control of the road. Eldridge agreed but 
exacted as a condition that old Daniel Drew should be ousted. 

At the stockholders’ meeting Vanderbilt’s directorate was 
elected. Drew was left out, but two new men, Jay Gould and 
James Fisk, Jr., were named. Eldridge did not know it that day 
but he discovered very quickly that Vanderbilt had double- 
crossed him. The old Commodore, then seventy-two years old, 
made one of the most astonishing blunders of his long career. 
When Drew learned that Vanderbilt had the votes to win he went 
to Vanderbilt’s Washington Square home. He was in tears. He 
begged Vanderbilt not to throw him out. He suggested that he 
be taken in as an ally with his large stockholdings and that the 
two men work together. No one knew Drew better than Vander- 
bilt. He knew him to be a scoundrel. Drew had tried to ruin him 



in the Harlem corner. He knew that Drew was merely a plunderer 
of every property and partner he dealt with. Why the Commodore 
listened to this oily old rascal pleading with tears in the name of 
their old “friendship” it is impossible to conjecture. 

But he did yield. And he paid dearly for his folly. It was agreed 
that Drew would not be elected to the board. But as soon as the 
board took office, a dummy elected for the purpose was to resign 
and Drew was to be named in his place and made treasurer. 
Worse than this, Vanderbilt agreed to name two associates of 
Drew, two of the most unconscionable rogues ever thrown up by 
American business, which has been peculiarly fruitful of them. 
This was that incompatible and ill-assorted pair, Jay Gould and 
James Fisk, Jr. Never had two more unscrupulous rascals a 
sponsor worthier of their talents than Gould and Fisk found in 

After a brief career in Pennsylvania where he operated a tan- 
nery and wrote a history of Delaware County, Gould appeared in 
New York with a patent rattrap he had invented. He gravitated 
to Wall Street where for the rest of his life his inventive genius 
was applied to bear, bull, and lamb traps from which he made 
uncounted millions. He was a small, frail, dark-bearded but pasty- 
faced man; sickly, gloomy, coldly cruel. Before he ended his 
career he had gathered under his power a web of railroads, steam- 
ships, the Western Union, the New York World, the New York 
elevated roads, comparable to that complicated and diverse em- 
pire that the Van Sweringen brothers assembled later. 

Jim Fisk was the son of a Vermont peddler and in his early 
life traveled the Connecticut Valley in wagons brilliantly painted 
like circus carts, selling cloth, silks, tin, and baubles. Like Drew, 
he had enjoyed a brief career in a small animal circus. He got 
his start selling blankets to the army during the war at extor- 
tionate prices. He fell in with Drew for whom he negotiated the 
sale of his Stonington steamboats. The hard, dry, sanctimonious 
Drew was attracted by the gaudy, extravagantly dressed dandy, 
glittering with rings and other jewelry, his blond hair and mus- 



tache elaborately pomaded and dressed. Drew aided him to set 
up in Wall Street as a broker, where he met Jay Gould. What 
was the attraction between Gould and Fisk it is impossible to 
say, save that each supplied the qualities for adventure that the 
other lacked. Gould was a man of powerful intellectual equip- 
ment, simple in his tastes, meticulous in his personal morals, 
scornful of the world and those in it with whom he dealt, resource- 
ful and merciless. Fisk was noisy, ostentatious, vulgar in his tastes 
and morals, audacious, with the mental equipment of a New 
England horse trader, but an able field general in a stock operation. 

Gould and Fisk had a special object in establishing connec- 
tions with the Erie road. In 1866 they bought a small road — the 
Bradford & Pittsburgh Railroad. They paid $250,000 for it and 
promptly issued $2,000,000 in bonds. They wanted to lease this 
line to the Erie, forcing that already distressed corporation to 
assume the new bonds. They did sell the road to the Erie and 
received for the $250,000 investment $2,000,000 of Erie bonds 
convertible into stock. 

As soon as these three freebooters — Drew, Gould, and Fisk — 
found themselves inside the Erie compound, with Drew as treas- 
urer and the three of them on the executive committee, with Drew 
representing Vanderbilt’s interests, they proceeded to rob Vander- 
bilt. What they did to this wise, suspicious, and formidable old 
warrior is a classic in duplicity and helps us form some idea of 
what can be and is done to the less knowing and helpless investor. 

First they undermined the Commodore with their fellow direc- 
tors. They intimated that the objectives of the Commodore were 
completely selfish, a disclosure that must have come as a great 
shock to that choice collection of selfless souls. Vanderbilt was 
tagged as an exploiter who wanted a monopoly of transportation. 
He would make the Erie play second fiddle to the Central. 
Hitherto it had been a mere jimmy in the tool bag of a safecracker. 
Having gained the confidence of the new directors, Drew, Gould, 
and Fisk induced that body of shocked altruists to issue ten million 
dollars in bonds. These were almost all turned over to the three 



saviors of the Erie in payment of various spurious claims. The 
Commodore, hearing of this, realized that they were bent on 
treason. He uttered a roar of wrath and hurried his lawyers off 
to Judge Barnard for an order commanding the looters to quit 
issuing bonds. 

Meantime Vanderbilt redoubled his efforts to buy Erie stock 
to ensure control. His brokers bought right and left. But the 
supply seemed inexhaustible. In fact, it was — at least as long as 
the printing press of Gould, Fisk, and Drew kept running. For 
the ten million in bonds they had grabbed were convertible; that 
is, they could be turned into stocks on demand. The Unholy Three 
had their printer turn these bonds into stocks. And they dumped 
50,000 shares on the market to be followed quickly by another 
50,000. It was these Vanderbilt was buying, the millions he was 
paying flowing into the pockets of the conspirators. And Jim Fisk 
said with glee: “We’ll give the old hog all he can hold if this print- 
ing press holds out.” 

When this perfidy dawned upon Vanderbilt he fell into a Jovian 
rage. Once again he rushed to his judge and got an order for the 
arrest of the villains for contempt. The judge who issued these 
orders must not pass unnoticed. He fitted into the comedy of the 
times as Harlequin in the pantomime. He was the Honorable 
George C. Barnard, a kind of human blackjack in the arsenal of 
Boss Tweed. Yale, maker-of-men, gave him to the world. He 
went to California and became a stool pigeon in a gambling joint. 
Later he was a blackface comedian. He returned to New York, 
where Tweed made him a magistrate and then a Superior Court 
judge in his kennel of justice. Tall, handsome, eccentric, boisterous, 
dressed in the loud and extravagant livery of a side-show barker, 
he sat on his judicial throne, whittling little strips of wood that 
his clerk kept piled on the desk for his amusement, spewing a 
stream of foul-mouthed impudence and abuse upon attorneys and 
litigants alike. Vanderbilt had bought him as he would an expen- 
sive horse. It was this gentleman who now ordered the arrest of 
Drew, Gould, and Fisk. 



Getting wind of this, the three marauders hurriedly packed the 
records, account books, securities, and cash of the Erie Railroad, 
amounting to six million dollars, and like the hard-pressed min- 
isters of a Balkan government fled in hacks for the border — for 
the Hudson River ferry and across to Jersey City, out of the 
jurisdiction of Judge Barnard. 

They now enacted one of the most fantastic burlesques in the 
whole history of American business. They took over the Taylor 
Hotel. They made it into a fortress. They recruited a small army 
of thugs and armed them with rifles and small cannon, to repel 
what they believed was a threatened invasion of Jersey by the 
roaring and blaspheming Commodore. They called their citadel 
Fort Taylor. Fisk, as colorful a rogue as ever sailed the Spanish 
Main, assembled a fleet of vessels which he armed and of which 
he assumed personal command to check the invader before he 
reached the shore. Thus, the pirates with their army and navy 
awaited the assault of Vanderbilt. The whole town was aroused. 
The militia was mobilized to deal with the expected crisis. 

But Vanderbilt had no intention of using force. The marauders 
were actually in a desperate plight and he knew it. At this point 
the command fell from the hands of the frightened Drew. Gould 
took it over. With $500,000 in cash he slipped quietly into Albany, 
where the legislature was in session. Somehow he got the ear of 
Tweed who up to this point was the ally of Vanderbilt. Gould 
gave Tweed $1 80,000 of Erie stock. He distributed large sums of 
cash among the members of the Black Horse Cavalry. A bill was 
introduced in the legislature to legalize the ten-million-dollar 
stock and bond issue. Barnard called it a bill to validate coun- 
terfeit money. Vanderbilt fought them with money and threats. 
Albany assumed the appearance of prosperity. The smell of money 
was in the air. All legislative business was suspended while the 
lawmakers gathered in groups and discussed the current quotations 
on votes. Rates fluctuated between two and three thousand dollars. 
The courts were drawn in. Gould and Fisk got a counterinjunction 
from Judge Cardoza. Thus, two Tweed justices — Cardoza and 



Barnard — squared off in a duel of injunctions. Vanderbilt lost at 
Albany. The law legalizing the security issue was passed. 

But Barnard still threatened the fugitives with jail for contempt 
if they appeared in his jurisdiction. And so, despite their victory, 
Gould and Fisk and Drew dared not enter New York. Vanderbilt, 
outwitted and beaten, had this advantage — his enemies were refu- 
gees from the haunts that were essential to their lives and plans. 

Vanderbilt knew that Drew dreaded jail. He got word over to 
Jersey that Drew’s time to talk business had come. Drew took 
the hint. He slipped one Sunday morning over to Vanderbilt’s 
Washington Square home. Vanderbilt let him know that he would 
not relent until the hundred thousand shares he had bought were 
taken off his hands at what he had paid for them. Drew was willing 
to settle and proposed another meeting. Some days later he slipped 
again across the river to the home of Vanderbilt’s lawyer, Judge 
Pierrepont. While he and Vanderbilt were in conference Gould 
and Fisk walked in. They had had old Daniel Drew shadowed 
and they followed to surprise him. There, with all the combatants 
present, Vanderbilt laid down his terms. 

He did not get all he asked. But, all things considered, he did 
very well at the hands of these cutthroats. They agreed to take 
back 50,000 shares at 55, paying $2,500,000 in cash and $1 ,2 50,000 
in securities. They agreed to pay a million dollars for the right 
to redeem the other 50,000 shares at 70 within six months. Thus, 
Vanderbilt recovered $4,750,000. He insisted this left him with 
a loss of $2,000,000. 

But Gould and Fisk were not done with him. They began to 
beat the price of Erie stock down with heavy short selling. When 
it reached 35 they bought back in sufficient quantity to get con- 
trol of the road while making another killing. And they found 
Vanderbilt glad to sell his remaining 50,000 shares at 40 instead 
of 70. They returned to New York, bringing with them the Erie 
headquarters, which they established in an elaborate white marble 
building at Eighth Avenue and Twenty-third Street. It contained 
a theater, which the incredible Fisk operated, finding thus an 



instrument for his exhibitionism and a recruiting station for his 

Vanderbilt had wanted control of the Erie. He wanted a monop- 
oly of transportation in the territory served by the Erie and the 
Central. He got that control through his purchase of the shares 
the criminal trio had fed to him in the stock market. But having 
got it, he changed his mind. At the moment he was probably more 
interested in ruining his enemies. By forcing them to pay him 
$4,750,000 and leaving them with the rotting hulk of the looted 
railroad on their hands, he felt he was wreaking vengeance on 
Drew, Gould, and Fisk. But he reckoned without the satanic in- 
genuity of Gould. 

Gould and Fisk thrust the aging and traitorous Drew aside. 
They made a prompt alliance with Tammany, put Bosses Tweed 
and Sweeney on the board of the Erie, and acquired the corrupt 
Judge Barnard as one of their own assets. They used him relent- 
lessly, Fisk getting him to sign an injunction on one occasion at 
night in the boudoir of his mistress. The new headquarters of the 
railroad, with its opera house and a private passage between Fisk’s 
private box and his offices, was called Castle Erie. 

In the Castle, Fisk called himself the “Prince of Erie.” Strut- 
ting aboard the flagship of his Albany fleet in an elaborate uni- 
form, he called himself “Admiral.” Marching at the head of a 
militia regiment that he commanded, he was styled “Colonel.” 
He occasionally exhibited himself in a gaudy equipage drawn by 
six horses, three black on one side, three white on the other, em- 
bowered amidst a bevy of his strumpets. Yet this preposterous 
and malignant clown possessed an audacious cunning that when 
united with the acute and sinister genius of Gould made them 
a menace to investors, speculators, banks, and industry until Fisk 
was shot down by a jealous lover and Gould vanished from the 
scene, consumed in the fires of his own restless nature. They were 
to harass Vanderbilt almost to the end of his days. They carried 
on a traffic war, playing the Erie against the New York Central. 
When the old Commodore cut rates, Fisk went West, bought up 



vast herds of sheep — the most undesirable and unprofitable 
freight — and filled Vanderbilt’s cars with them at destructive 

The Commodore was to encounter these bold raiders upon 
another scene. Gould’s peculiar genius found its highest expression 
in plot and conspiracy for swift raiding adventures. In 1870 he 
perceived that the supplies of gold in the nation were quite lim- 
ited. The government had a large gold reserve locked up in the 
Treasury vaults. And Gould saw that if he could manage to keep 
that locked up it would be possible to corner the floating supply. 
He managed to meet President Grant during a visit of the latter 
to New York. He then pointed out to the President that, as the 
movement of the crops was near, he was in a position to bring a 
great benefit to the farmers if he steadfastly refused under any 
circumstances to permit any of the government’s gold reserve to 
be released. If the President did that it would tend to raise the 
price of gold on the gold market and this would depreciate the 
dollar in terms of gold. Foreign buyers of wheat must buy Ameri- 
can dollars to pay for wheat. If gold were high these buyers could 
buy more dollars with their gold. Thus, wheat would be made 
cheaper for foreign buyers, which would stimulate buying of 
wheat here. This was essentially the same theory that the late 
Professor Warren sold to President Roosevelt in 1933 and that 
President Roosevelt naively swallowed with the same insouciance 
as Grant. 

Gould exploited his conquest of the gullible Grant by exhibit- 
ing the President in Fisk’s private box at the opera house in 
Castle Erie and aboard one of Fisk’s Albany liners, entertained 
publicly by Fisk in his admiral’s regalia. Then Gould bought 
seven million dollars worth of gold, sending the price up from 
132 to 140. Thereafter he and Fisk, with certified checks issued 
from a bank they controlled, bought forty millions of the dwindling 
metal until they had driven the price up to 150. Gold became so 
scarce that business and banking were deranged. Speculators were 
ruined. Brokerage houses suspended. It was the greatest panic in 



history on the Exchange. Then Gould got advance word that 
Grant, disillusioned, was going to release government gold to ease 
the panic. He secretly betrayed his partners in the conspiracy and 
began to sell while they were still buying. Friday morning, pande- 
monium broke loose in Wall Street and the Gold Room. Fisk was 
buying frantically, pushing the price up to 162 V2, while his pal 
was selling. When the government gold flooded into Wall Street, 
the price of gold slipped back to 135. The whole market fell into 
the worst panic it had ever known. Fisk and all the coconspirators, 
including Gould, were caught in the decline. They had to force a 
closing of the Gold Room through an order of their friend Judge 
Barnard, to save themselves from ruin. 

Once again the aging Commodore Vanderbilt was called in to 
help the market with his wealth. He made loans of a million 
dollars on that Black Friday to support the market. But it is not 
true that his part in this crisis amounted to anything more or that 
it played any major part in the crisis. After this, his battles with 
the spider Gould and the peacock Fisk came to an end. Fisk him- 
self some years later, arrayed in velvet and glittering with dia- 
monds, was killed coming down the grand staircase of a New 
York hotel to enter his ornate coach. His murderer was a rival 
profligate named Stokes, suitor for the affections of Fisk’s public 
strumpet, Josie Mansfield. Old Daniel Drew, started on the road 
to ruin by his two honor pupils in a bear raid on Erie which Drew 
attempted only to be caught and squeezed out of a million by his 
pals, was driven from Wall Street ultimately and died in poverty. 

As for Vanderbilt, he became a legendary figure. He was easily 
the first among the great money captains of the country. Greatest 
among the industrial giants were the railway kings, and he was 
the greatest railway king of all. He could not be compared in 
intellectual gifts with Gould, who was, perhaps, one of the most 
powerful minds among all our money barons. But Gould was 
essentially a crook. His mind worked in crooked ways. He could 
achieve only as a conspirator, a wrecker, a public enemy, medi- 



tating and carrying out sorties and raids upon the public and 
private purse. 

Vanderbilt was the richest man in America, worth a hundred 
million dollars. He remained more in seclusion. His very name was 
one to conjure with. He occupied such a position as only the elder 
Morgan attained a generation later. 


Almost to the end Vanderbilt continued to give a general super- 
vision to his vast interests. His son, William H. Vanderbilt — he 
of the long flowing Dundreary whiskers — assumed immediate 
charge of his railroad empire. But the foul-mouthed, blasphemous, 
and terrifying old barbarian held fast to the virility that had 
driven him forward. Men stood in awe of him. His son William 
never ceased to fidget uneasily in his presence. But he had more 
time to survey the infinite now, and his explorations brought 
him to the sanctum of Mrs. Tufts in Staten Island. The Fox 
sisters were still exciting the curiosity and wonder of the world 
since their discovery of the spirits thirty years before. And Mrs. 
Tufts was a practitioner of the dark art of communication be- 
tween the Earth and the Beyond. The spectacle of this rowdy 
old pragmatist softened down to an evening at home with the 
shades of old Phoebe Hand and his departed son George titilated 
the risibilities of the hard-boiled gentlemen of Wall Street. But, 
after all, why snicker at Vanderbilt? For while he was fraternizing 
with the ghost of his grim and masterful old mother was not the 
far more astute and incredulous Sir William Crookes walking 
arm in arm with the spirit of a lovely female in his laboratories? 

In the summer of 1868 Mrs. Vanderbilt died. The aged and 
bewildered former hostess of Bellona Hall received a state funeral 
worthy of a Chicago gangster. Horace Greeley and other notables 
attended, along with the thirty grandchildren of Sophia and the 
masterful mate she had never learned to stand up to. 



About this time Vanderbilt’s interest in spiritualism led him 
into an affair with as odd a pair as ever set the gossips cackling in 
that Age of Innocence. They were Woodhull and Clafin, brokers 
and bankers, 44 Broad Street, actually Victoria Woodhull and 
Tennie C. Gafin, two sisters who bore the names of husbands 
who belonged to other chapters in their checkered lives. After 
various shady adventures in other pastures they turned up, about 
the time of the Erie wars, in Wall Street, where, despite their 
complete ignorance of securities and money, they opened offices 
as bankers and brokers. What is more, they made a howling suc- 
cess — $750,000 in profit the very first winter. 

In the stodgy Manhattan of the ’sixties, when women still sim- 
pered and fainted and obeyed their lords, these two handsome 
and peppery ladies were feminists, suffragists, champions of the 
single standard and of birth control, stockbrokers professing a 
mild brand of socialism, and bankers functioning as leaders of 
labor. They were vanguard persons. In the World of Yesterday 
they became advance guards for the World of Tomorrow. Victoria 
announced herself a candidate for the presidency and even 
wore bobbed hair. Tennie C. was a section leader of the Inter- 
national Workers’ Party and colonel of the Sixty-first Regiment, 
which she equipped at her own expense and drilled. The sisters 
published Woodhull & Cla fin’s Magazine , a weekly devoted to 
sex, isms, and scandal. It got them into the toils of the law more 
than once. But they were also spiritualists, and Victoria was a 
medium. Since her third year she had specialized in visits from 
the angels. 

And, the old Commodore being a spiritualist and a perfect 
reservoir of tips on the market, it would have been strange if he 
had not made his appearance in the role of an angel in the drawing 
room of the weird sisters in Great Jones Street. Indeed, he became 
a constant visitor to both Great Jones Street and 44 Broad. The 
huge earnings of these innocent girls were generally connected 
with the Commodore’s market clairvoyance. He was an intimate 
of Tennie C., and rumor had it that no sooner was poor Sophia 



cold in her splendid tomb than the amorous septuagenarian began 
making passes at Tennie. How far he got with that exploit must 
remain a subject of speculation. But he soon abandoned that 
chase and disappeared one day from his accustomed haunts. When 
he returned some days later it was to bring to No. io Washington 
Street, as its mistress, the young lady with whom he had eloped 
to Ottawa. She was Miss Frank C. Crawford, a tall, good-looking, 
and dignified Southern girl, about the age of his older grand- 
children. It was a jolting blow to his family. But not one of them 
ever dared to lift so much as an eye in reproach to this imperious 
old householder on this or any other point. As for Victoria and 
Tennie C., they shook the dust of New York from their heels 
soon after. Well supplied with funds they went to England where, 
as might be supposed, they married men of wealth, Tennie C., 
now known as Tennessee, becoming Lady Cooke and Marchioness 
of Montserrat. 

Commodore Vanderbilt died at No. io Washington Square on 
January 4, 1877, a little short of his eighty-third year. The great 
engine, subjected to excessive mileage, ran down. The deathbed 
scenario might have served for the passing of a bishop. The chil- 
dren and their spouses, the preacher, the doctors, and the new 
wife and grandchildren stood around and sang about old Daniel 
Drew’s Lord. The Commodore’s last words, so an admiring world 
was told, were: “I’ll never let go my trust in Jesus.” 

During the later years of his life he had been profoundly 
concerned about one form of immortality — the immortality of the 
great name of Vanderbilt. He had erected a terminal station in 
lower Greenwich Village and adorned its fagade with a $250,000 
entablature — a bronze monstrosity of which the central figure was 
a statue of himself. He meditated deeply about his dynasty, and 
the empire of which the Central was the mother state. He was 
worth $105,000,000. He determined that this majestic pile of 
wealth should not be dissipated by his descendants whom the 
Commodore never rated very highly. William H. Vanderbilt, his 
son, who was managing his railroad properties, had won the old 



man’s respect. He therefore left to him property valued at 
$90,000,000, while among all the others he divided the remaining 
$15,000,000. To Cornelius, his wayward son, he left only the 
interest on a $200,000 trust fund. 

William H. Vanderbilt expanded this empire to a point where, 
before his death, he confided to a friend that he was worth 
$194,000,000. He, in his turn, but less severely than his father, 
left half of that to two sons, William K. and Cornelius, and the 
balance partly directly and partly tied up in a trust to his other 
six children. The scions of William K. and Cornelius were numer- 
ous, but the chief heir was Alfred, who died in 1928, leaving a 
hundred million. The combined wealth of all the Vanderbilts today 
is probably as large as it ever was. But its domination of business 
is far less. Numerous progeny have divided it. And the modern 
technique of managing vast fortunes has tended toward diversifi- 
cation and diminution of control over any particular enterprise. 
The Vanderbilt stock in the New York Central does not amount 
to more than three per cent of the whole. Dynasties have hard 
going against the erosion of progeny, laws, fate, and the times. 
And in the Vanderbilt clan itself has arisen no one remotely 
resembling that remarkable mixture of blood and nerve and 
gristle and guts and audacity and intolerance, irreverence and 
greed, who founded the fortune. 

His was the golden era of capitalism. It began to wane a 
decade before Vanderbilt died. What has followed since has been 
a capitalist machine very highly complicated by speed mechanisms 
and governors and brakes that hamper and foul it. Then there 
was the free economic society — no government regulation, no 
self-rule in business, no Sherman laws and ICC’s and utility 
commissions, on the one hand, and no trade-association dominance 
and cartels, on the other. Competition reigned supreme. The age 
of machinery had developed far, but manufacturing and farming 
and commerce were still operated by comparatively small units. 
There was an abundant mortality list and an equally abundant 
birth rate in industry yearly. In farming, manufacture, and dis- 



tribution, the production of wealth and utilities was carried on 
wholly by independent proprietors. The corporation, the chain 
store, the holding company, and the vast technological fermenta- 
tions of the last fifty years had not yet been developed. A man 
got rich by producing goods and exacting for himself as large a 
share as he could by making laborers work as long as he could, 
paying wages as low as possible, and charging as high a price as 
the traffic would bear, usually powerfully limited by competition. 
His yield was pure profit, the difference between cost and price. 
The machine had enabled him to share in the product of a far 
larger number of men than during the simple handicraft age. But 
the wealth that individual men accumulated was moderate by 
present-day standards. 

In railroading, the corporation had made its appearance, and 
there men like Vanderbilt and Gould and Fisk and Scott and, 
even before them, Daniel Drew were perfecting the mechanism 
of exploitation of properties through stock manipulations. This 
was a process that enabled the exploiter to make vast gains that 
did not come out of the property at all. It did not consist in mak- 
ing railroad profits and lopping off an unreasonable share. The 
object of the game came to be to lay hold of the savings of other 
men rather than their expenditures for goods and services, to 
entice them into stock buying, and by manipulation of the stocks 
to swindle them out of their savings. This was the technique 
John Law showed to the world and which came to be the charac- 
teristic of wealth getting in the age about to dawn. Daniel Drew 
did not calculate, as he would say, to grab the profits of the Erie. 
He was not concerned about the Erie making profits. And it made 
none. But he made millions just the same, not out of the people 
who bought passenger and freight service from the road, but out 
of the investors who tried to buy into its ownership through 

This was a wholly new method of money-making. And when 
it was finally understood it became possible for men like William 
H. Vanderbilt, with little or no skill as a capitalist, to make fifty 



million dollars in a single operation or for Henry H. Rogers and 
William Rockefeller to make $39,000,000 in a few days in one 
flyer in Amalgamated Copper. 

If there is anything in capitalism worth saving and if there 
were any who wished to save it, the time to have done so was in 
those early days when Drew and Gould and Vanderbilt began 
their experiments in corporate manipulation. From that time on 
the history of the system has been the invention of one device 
after another by exploiters to control it for the purpose of 
exploiting it, the struggle of one group after another to protect 
themselves from exploitation by further control devices, and the 
long battle of the government by still other controls to prevent or 
circumvent the controls of the private groups. The end is the en- 
casement of the system in a framework and tether of constricting 
chains that are slowly destroying it and that have almost finished 
their job. 


Hetty Green 



Eakly in 1833 a young man arrived in the town of New Bedford 
and went at once to the offices of Isaac Howland, Jr., & Company. 
His name was Edward Mott Robinson and thereafter he was the 
“Company” in that important firm of merchant-adventurers. He 
was a dashing figure, tall, erect, handsome, distinguished in his 

On December 29 of that same year New Bedford learned why 
this romantic young stranger had been brought into the great 
house of Howland. On that day Edward Mott Robinson married 
Abby Slocum Howland, the daughter of Gideon Howland, Jr., who 
was practically head of the firm. 

If ever this nation was money-mad it was in that decade of our 
history. Men talked about the Money Devil. The whole country 
was up in arms helping the redoubtable Andy Jackson smite that 
monster, who was supposed to be roosting then in the wicked 
United States Bank. But for all that, a French traveler observed 
that the “money devil may be found sitting in state upon his altars 
in all the towns of these states with large numbers of the population 
bowed down in adoration before him.” Speculation ran wild. Men 
gambled their time, their fortunes, their lives in pursuit of quick 
riches. And then, as now, one of the most romantic of all the 
gambles was the oil business. But the oil business of that day 
was carried on not with the drill but with the harpoon. Men bored 
for oil not in the rocks but in the blubber of the whale. Whale oil 
was the light of the world. New Bedford was the Mecca of whale 
oil. And the Howlands were its prophets. 




The house of Isaac Howland, Jr., & Company was formed in 
1811. The Howlands had been in and around New Bedford since 
1621. From the first they possessed the secret of making money. 
By 1833 they had not merely acquired great wealth; they com- 
pelled an unquestioning recognition as the peak of the very upper 
crust of New Bedford aristocracy. The Howlands were to New 
Bedford what the Cabots were to Boston. Theirs was not a codfish 
aristocracy. Their Brahminism was founded upon a bigger fish. 
For fifty years they sent out a fleet of more than thirty fine whal- 
ing craft. For fifty years they wreaked upon the whale the ven- 
geance of the faithful for its treatment of Jonah, and waxed fat. 
And in 1833 when young Robinson entered the business and the 
family, the Howlands were on the way to supplying America with 
some of its first crop of millionaires. 

Robinson himself was a patrician of unmistakable caliber. Like 
the Howlands, he was a devout Quaker. He hailed from Provi- 
dence. His grandfather had been a justice of the Supreme Court 
of Rhode Island. His great-grandfather had been speaker of the 
Colonial Assembly and deputy royal governor. He himself had a 
fancy for commerce. And his subsequent career confirmed the 
wisdom of this fancy. He became quickly a man of the first 
importance in New Bedford. 

A year later, upon a very windy November day, a horseman 
galloped up to the counting room of Isaac Howland, Jr., & Com- 
pany with a message for Mr. Robinson. He was to come home at 
once. His lady had just been delivered of an infant. Boy or girl? 
A girl, replied the messenger. A brief shade passed over the brow 
of the new father. The house of Howland and the house of Rob- 
inson needed a son. Had this been a boy, Mr. Robinson would 
have leaped upon his horse and hurried to his home. As it was 
he arranged the papers on his desk very carefully, adjusted his 
greatcoat with deliberation, put his high hat on his head at the 
proper angle, looked it all over in the long wall mirror, and 
trotted off to behold his daughter. In his wife’s room he looked 



with interest at the infant who had just entered this money-mad 
world. A girl! Well, there was no help for it. Better luck next 
time. Meantime this child must be named. And so they called 
her Hetty — Hetty Howland Robinson, to be known in later years 
to all the world as Hetty Green, the richest woman on earth, and 
the strangest. 

In eighteen months the house of Robinson had better luck. A 
boy was born. And when this happened little Hetty was bundled 
off to the home of her grandfather, Gideon Howland, Jr., under 
the care of her maiden aunt, Sylvia Ann Howland. For some 
unknown reason, that continued to be her home. She went occa- 
sionally to her mother’s and sometimes her mother visited her. 
But always Aunt Sylvia Ann was her mother in fact. Even after 
the baby brother died in infancy she continued under her aunt’s 
roof. It is probable that her mother was an invalid and unequal to 
the task of rearing this strong, vigorous child. Then too there is 
some reason to believe that this frail Abby Slocum did not get along 
so well with her imperious spouse. 

As Robinson grew older he became more immersed in his busi- 
ness and his investments. He got a kind of local reputation for 
greed — very genteel greed, of course, not dusty and squalid and 
ugly like Miss Hetty’s in later life. But enough, all the same, to 
make someone say in New Bedford that he “squeezed a dollar 
until the eagle screamed.” It is a local tradition that this was the 
origin of that famous phrase. Meantime Gideon Howland, Jr., 
was growing older. His eyesight was failing. He had difficulty 
reading his New York newspaper and its financial and trade news. 
And so each day he took his seat by the fireside and his little 
granddaughter Hetty would read to him all the business and 
financial news. In a little while she astonished friends by quoting 
prices on bonds and stocks and furnishing bits of business news 
in the shop talk that went on in Gideon’s home. 

It is an odd fact that financial geniuses display great precocity. 
John D. Rockefeller made an original discovery of interest on 



money at ten. He was a man of wealth at twenty-five. Russell 
Sage was a successful wholesaler at twenty-three. J. P. Morgan, 
Andrew Carnegie, Edward Harriman, all revealed their talents 
for profit at an early age. 

One day a little girl of eight years walked into one of the banks 
in New Bedford. This was before the masses had been invited 
into the banks. The bank was the rendezvous for the dollars of 
the well to do and the adult. But this little girl was the daughter 
of Edward Mott Robinson, and so the bank president patted her 
benignly on the head and asked what she wanted. She wanted to 
open a bank account. And she did open it there and then. This 
she had done of her own accord and without consulting anyone 
at her home. 

In the grim, relentless Hetty Green of mature life there was 
no suggestive remnant of the merry, handsome girl of those New 
Bedford years. At first she had a governess. Later she was sent 
to Eliza Wing’s boarding school in Sandwich, where the prosperous 
Quakers sent their daughters. After that she went to Miss Lowell’s 
select school in Boston. She loved singing and dancing and while 
in Boston lived as gaily as any girls in that period. But at home, 
under the severe eye of her pious Quaker aunt, she wore her 
plain gray frock and her leaden-colored bonnet. 

It was because of the severity of this devout home that Hetty 
loved to go to New York. There she attended social functions at 
the homes of the Aspinwalls, the Rhinelanders, the Astors. Her 
father’s growing wealth and social position made for her an easy 
entry into the most exclusive circles. Her own bright, vivacious 
conversation made her a companion much sought after. Moreover, 
she enjoyed the prospect of great wealth. Later many recalled her 
as a young woman of stately carriage, high color, and a wealth 
of glorious hair. 

But already she was beginning to display those traits of per- 
sonal economy — even parsimony — that characterized her later in 



life. Once, on a protracted visit to New York, her father sent her 
$1200 to buy clothes. When she returned to New Bedford she 
still had $1000 of it to put into her bank account. 

In February, i860, her mother died. This event brought Hetty 
her first money and her first serious family quarrel. Her mother 
had inherited $40,000 from her grandfather, Isaac Howland. This 
sum had been put in trust for her. When she died there arose the 
question of how the estate should be divided. A Boston lawyer 
wrestled with the problem and held that the personal property 
should go to the husband, Mr. Robinson, the real estate to the 
daughter, Hetty Robinson. But when the estate was inventoried 
it was found the personalty amounted to $120,000 and the 
realty to only $8000. Hetty and her Aunt Sylvia felt deeply 
aggrieved at this. It was the beginning of a coolness between Aunt 
Sylvia and Hetty’s father. 

The father decided to move to New York and its larger fields. 
Hetty remained with her aunt who compensated her for the loss 
of her inheritance by a present of $20,000 in stock. This was the 
beginning of her fortune. But in 1863 her father requested her 
to come to New York. She accordingly said good-by to Aunt 
Sylvia, her old home, her Quaker friends, and to New Bedford, 
now at the top of its prosperity as the center of the whaling indus- 
try. Henceforth her home was to be in the great city whose finan- 
cial purlieus she was to haunt for the next half century. 


On June 14, 1865, while the nation was still draped in black for 
the death of Abraham Lincoln, Edward Mott Robinson died in 
New York City. The next day, and while her father’s body was 
still lying in its coffin, Miss Hetty Robinson sent the following 
note to the men in charge of his office: 

Gentlemen: I have to request that you will answer any questions that 
Mr. E. H. Green may put to you on all matters about my father’s busi- 



ness affairs. I wish you gentlemen to consult with Mr. Green on all 
matters of importance where advice is required. 

Hetty H. Robinson 

Behind this cold epistle lay a story that has never been fully 
explained. Early in June Mr. Robinson became ill. He feared 
death to be imminent and sent for his daughter, who was away 
at the time. When she arrived he demanded to see her alone. 

“I have been murdered,” he said. His life was ebbing fast and 
he spoke in quick, feeble gasps. “I have been poisoned by a band 
of conspirators. You will be next. Watch over yourself.” 

He added that she was to receive his entire fortune and that 
Edward H. Green and Henry Grinnell were to be his executors. 
He told her also, according to her story, all the details of the con- 
spiracy against his life. Then he closed his eyes and died. 

Was there any truth in this? Or was this just the fevered delu- 
sion of a dying man? Hetty Robinson believed it. Not only that, 
but to her dying day this weird revelation continued to exercise a 
powerful influence over her life. 

In a few days Mr. Robinson’s will was opened. Her father’s 
fortune was indeed left to her. But to her amazement and chagrin 
only one million dollars was given to her outright. The balance, 
supposed to be about four million dollars, was put in a trust for 
her. Instead of Green and Grinnell, two others, employees in her 
father’s office — clerks, she called them — were named as executors 
and trustees. Her acceptance of her father’s dying accusations 
now became complete. 

But she was now worth a million dollars. And as she escorted 
her father’s body to New Bedford for burial beside her mother, 
her mind was torn between her plans for investing her new for- 
tune and the terrors inspired by the tale of the plot her father 
had related. 

Hardly had Miss Hetty returned to New York when she was 
shocked by the news of the death of her Aunt Sylvia Ann, just 
three weeks after her father’s death. Sylvia Ann Howland was 
one of the richest women in America. Her fortune was not less 



than two million dollars. She had always declared she would leave 
her whole estate to her niece Hetty. Now Hetty hurried to New 
Bedford. She wondered if this could be another chapter in the 
plot first to concentrate her father’s and her aunt’s wealth in her 
person and then assassinate her. 

At Sylvia Ann’s funeral the relatives swarmed like the Chuzzle- 
wits at the pretended deathbed of old Martin. The place was 
overrun with doctors and nurses and neighbors. Among them all 
Hetty Robinson, usually robust and full of color, presented a pic- 
ture of consuming worry. She was haggard, pale, weary. The 
alarm that had eaten at her heart since her father’s death was 
now intensified almost to consternation. One of her aunt’s doctors, 
strangely deficient in tact, commented to her on her condition, 
which he attributed to grief. 

“If you continue like this, Miss Robinson,” he observed, “you 
will not live a year.” 

Some close relatives with their heads together in a little group 
talked of the dead woman’s fortune and her will. 

“We are to get everything when Hetty dies,” one whispered. 
“When that happens we are going to add a greenhouse to this 

Hetty, standing beside them unseen, heard this. That night she 
crept up to a storeroom of the old house, locked the door, piled 
the furniture around so as to conceal a bed on the floor, and slept 
there until morning. For days she repeated this. She refused to 
eat a morsel prepared for her by any other hand than her own. 

When Sylvia Ann Howland’s will was offered for probate Hetty 
Robinson’s terror was changed in an instant to rage. Half of the 
good lady’s fortune was given away to civic and charitable insti- 
tutions and to numerous relatives. The other half was left to 
Hetty but, like her father’s fortune, was tied up in a trust. 

She immediately protested the probate of the testament. But 
the evidence of its authenticity was so complete that she with- 
drew her appearance and the will was admitted by the court. 
This, however, was but the beginning of this suit, one of the 



most famous will cases in the annals of the American courts. A 
month later Miss Robinson appeared with another will which she 
demanded should be put into effect. This rambling, half-illiterate 
document bequeathed all her property to her niece “as freely as 
my father gave it to me,” all “except about $i 00,000 in presents 
to my friends and relations.” Then it revoked all wills “made by 
me before or after this one.” The testator then declared that she 
gave this document to her niece so that she might show it in the 
event a will “appears made without notifying her and without 
returning her will to her as I have promised to do. I implore the 
judge to decide in favor of this will as nothing would induce me 
to make a will unfavorable to my niece; but being ill and afraid, 
if any of my caretakers insisted on my making a will, to refuse, 
as they might leave me or be angry.” 

Along with this document Hetty Robinson offered the follow- 
ing explanation. Her aunt was determined that Hetty’s father, 
living at the time this will was made, should never receive any 
more of the Howland fortune. She therefore proposed to Hetty 
that she, Sylvia, would make a will leaving all to Hetty if Hetty 
would in turn make her will leaving all to Sylvia. Hetty agreed 
to this, whereupon the above testament was made. Hetty in turn 
gave a similar will to her aunt. She now asserted that this 
amounted to a contract and she called on the court to enforce 
performance of it. 

The case presented some novel points of law that we need not 
notice. To the people of New Bedford it involved one all-engross- 
ing question — did Hetty Robinson forge this document? 

The case became a cause Ulebre. It dragged along for two years. 
The testimony filled a thousand pages. It consumed $150,000 in 
costs. Among the expert witnesses called were Dr. Oliver Wendell 
Holmes, Professor Louis Agassiz, and Professor Benjamin Peirce, 
the celebrated mathematician. Handwriting experts were called 
on both sides. Some pronounced the newly discovered will an 
obvious forgery. Others declared the alleged signature of Miss 
Sylvia Ann Howland genuine. 



Did Hetty Robinson forge that will? The court never answered 
the question. The case of Sylvia Ann Howland’s remarkable will 
was disposed of on a purely technical point. But Hetty lost her 
suit. She never got over the defeat. It was the beginning of a 
lifelong hatred for lawyers. It was also the beginning of a long 
life of endless litigation about an infinite variety of things rang- 
ing from a two-dollar tax bill to suits involving millions. It served 
also to introduce her to the American newspaper-reading public, 
before whom she was to remain for another half century. She 
never forgave any of the parties to the suit. 

In spite of her defeat, however, she was the possessor of a 
million dollars in cash from her father and several more millions 
in trust from her father’s estate and her aunt’s. Compared to 
the monumental fortune she reared on this foundation this was 
a modest start. But she was, in fact, already one of America’s 
richest women. 

Now began that remarkable career of investment and money- 
making which has been equalled by no other woman who ever 
lived and by few men. But also there took form in her heart that 
enduring and consuming bitterness that pervaded her whole life, 
that filled it at times with gloom, that led her into all sorts of 
strange meannesses and ruthless quests after revenge, and that 
in the end raised up in her mind a kind of mania of persecution. 
All her life she believed her father was murdered, that her aunt 
was murdered by the same hands, and that her relatives, bound 
together in a persistent plot, were resolved to murder her. 

• m — — — 

On the eve of Saint Valentine’s Day in the year 1865, a gentle- 
man named Edward H. Green, a bachelor of wealth, sat down in 
his apartment to write some letters. Among other things he put 
a valentine into an envelope. Then he made a check in payment 
for a suit of clothes — a very cheap suit of clothes, although this 
bachelor was a man of large means — and put that in another 



envelope. Then, getting his envelopes mixed, he addressed the 
one with the valentine to his tailor. The one containing the check 
he addressed to the lady of his heart — Miss Hetty Howland Rob- 

Mr. Green was weary of his lonely life. He was now forty-four 
years old. Only a short while before he had met Miss Robinson 
and he launched at once a violent attack upon her heart. She 
had hesitated at first, not from coyness. She was now thirty-one 
years old and her practical, unsentimental nature held her back 
from precipitate investment — unconsidered investment of any 

However, when the envelope containing the check intended for 
the tailor arrived, she was completely overcome. Here was a man 
worth a million dollars who was so careful of his money that he 
paid the very lowest price for his clothes. What woman’s heart 
could be proof against such touching economy, thus so artlessly 
revealed? We do not know what the tailor thought when he got 
the valentine, but we do know that Miss Hetty there and then 
made up her mind to accept Mr. Green. When her father was 
dying he urged her to complete her intention and marry Green, 
who would be a responsible helpmate in the management of her 

Throughout her life Hetty Green employed a rather crude sys- 
tem of investigation before making any investment. She herself 
went to persons she knew to be the enemies of the man or 
corporation seeking the funds. Thus she learned everything that 
could be said on the other side. Then she bluntly confronted the 
applicant for funds with all the criticisms and accusations against 
him and asked for a reply. But apparently she did not do this 
when Mr. Green proposed that she invest her life and happiness 
in marriage. Had she inquired she would have learned that the 
tailor’s bill for the cheap suit was a poor indication to her lover’s 
real character. She would have been told that he was already 
known as Spendthrift Green. He loved at times to play the grand 
seigneur, a role for which he was well equipped. He was a large, 



portly man, standing head and shoulders above his fellows. He 
carried himself erect, walked with a brisk, decisive step. He was 
worth a million dollars and he was already known in Wall Street 
as a daring and successful speculator. 

What Miss Robinson did know, in addition to the delicate inti- 
mation conveyed in the misaddressed tailor’s bill, was that her 
suitor had begun life as a poor boy, though of fine family, and 
had risen to wealth through his own exertions. He came of an 
excellent family with its beginnings in early Massachusetts days. 
His father had been a merchant in New York and Bellows Falls, 
and in the latter town Mr. Green was born. At eighteen, with no 
other assets than his pleasant, affable nature, he became a clerk 
in the firm of Russell, Sturgis & Company of New York. He was 
sent to the Philippine Islands. He must have been an attentive 
agent and a good businessman, for in five years he was a member 
of the firm. He was making money. He put other irons in the 
fire. He extended his operations to the port of Hong Kong and 
made more money. When he came back to New York he was a 
rich man. 

When her father died Hetty was already plighted to Green, 
and he remained by her side throughout the great will case, coun- 
seling and encouraging her. Just before the decision against her 
the pair were married — on July n, 1867 — at the residence of 
Henry Grinnell in Bond Street, New Bedford. 

If Miss Hetty did not investigate her fiance’s character and 
habits among his enemies, she did not fail to observe one precau- 
tion. She required him to sign a contract under which his wife’s 
fortune would not be liable for his debts but at the same time 
stipulated that he would be liable for her support. How this ar- 
rangement turned out in the end we shall see. 

Miss Robinson’s newly acquired husband had spent most of 
his early business years in the Orient. With his headquarters at 
Manila, he had ranged about China, India, and Japan, with his 
eyes open for profits. Something of the rover lingered in his make- 
up. And now that he was married, the wanderlust flamed up in 



him anew. He steered his ship for England and persuaded his wife 
to agree upon this course. 

Mrs. Green at this time was filled with disgust at the stupidity 
of American courts and the villainy of American lawyers. It is 
possible that this mood aided her husband in bringing her around 
to this revolutionary change in her life. At the time, he was a 
large, impressive, expansive man, with grizzled Jovian whiskers, 
the sort one sees on the substantial gentlemen in one of Bulwer- 
Lytton’s novels. It is quite possible that he cast a feeble spell over 
her mind and that in her own hard, practical way she was fond 
of him. At all events, as soon as the business of the Sylvia Ann 
Howland estate was wound up, Mr. and Mrs. Edward H. Green 
took ship for England. 

Here they were to remain for six or seven years. Here some 
thirteen months after the marriage their first child — a boy — was 
born at the Langham Hotel in London. He was adorned with all 
the ancestral tribal names — Edward Howland Robinson Green — 
every one of them a patron saint who had made his million. Three 
years later their second and only other child arrived. She was 
called after her mother and her Aunt Sylvia — two female mil- 

In spite of these domestic events it was here in London that 
Mrs. Green definitely turned her attention to business. She had 
a million and a half in her own name, perhaps more. She had a 
million in her inheritance from her aunt in a trust fund. She had 
several million in her father’s estate also in a trust fund. There 
was something ludicrous in this collection of trustees set up to 
protect this innocent female in her financial affairs. Even her 
husband had been urged upon her by her dying father as a kind 
of protector for her fortune. What all her guardians did with their 
funds and what she did with those under her own control will ap- 
pear later. Now, however, she went resolutely about the business of 
pounds, shillings, and pence. Very naturally, her first investments 
had been in government bonds. She was reading about bonds to 



her grandfather at an age when most little girls are reading about 
the three bears. Before she had left America she had already re- 
vealed her feeling for profitable investment. 

The end of the Civil War found the country’s credit impaired. 
The war had eaten up huge quantities of money, more indeed 
than the government could supply. To make up the deficiency the 
Treasury had done what governments always do in the same sit- 
uation — it turned to the printing press and began to print money 
as fast as it was required. These notes became famous or infamous 
as “greenbacks.” They were worth fifty cents on the dollar in 
gold. They dragged the market value of government bonds down 
with them. Here was an excellent chance for any far-seeing person 
to pick up government securities at half their value. All it required 
was a little faith in the nation that had just demonstrated in a 
most extraordinary way its ability to come through a terrific 
civil war. Looking back at it now, the recovery of the country 
ought to have seemed a sure thing to any observer. The war had 
given an immense impetus to the resources of the continent — coal, 
iron, oil, copper, gold, and silver were just being discovered and 
developed. But for all that, the nation’s credit was at low ebb 
and through 1865, 1866, and 1867 Hetty Robinson bought all 
the government bonds she could lay hold of. Some she got as low 
as forty cents on the dollar. She knew how to wait out the market 
and buy bonds on the declines that occurred every time a gust 
of bad news swept the country. 

When she got settled in England she continued this course, 
adding, however, an interest in railroad securities, especially Rock 
Island bonds. She became well known in the financial district of 
London. Indeed, she associated herself with a group of financiers 
and organized two banks from which she made large profits. In 
one year in London she made more than a million and a quarter 
dollars. In a single day she cleared $200,000. “I have made more 
money than that on individual deals,” she said in afteryears, “but 
that was the largest single day’s earnings of my life.” 



She was already dropping into those personal idiosyncrasies 
that marked her among women in later years. The habits of thrift 
that had expressed themselves in her girlhood were now hardening 
into a state of mind bordering on parsimony and meanness. She 
might have been a handsome figure now, in the full tide of her 
womanhood. Her features were strong but well formed. Her skin 
was dear and suffused with a rosy glow that persisted late into 
life. Her deep-sunken eyes were large and luminous, even brilliant. 
Her beautiful hair, combed in a severe part on top, fell over her 
neck in a rich roll of abundance. But these charms were all lost 
through her excessively plain and even homely dress. Fashion 
passed her by. She had no interest in it. Indeed, it may be doubted 
if she had any mechanism for the perception of the beautiful. Her 
mind was now engrossed with her bonds and her banks and with 
the small boy who trudged at her side wherever she went. 

It was while she still lived in London that Mrs. Green found 
herself at the fork of the roads in her domestic life. One road led 
off into Threadneedle Street, the other to the London clubs and 
Rotten Row. The wife took the trail that led to Threadneedle 
Street, the Exchange, and the banks. The husband took his way 
along the road that led to London club life. This was the beginning 
of those two trails that this ill-assorted pair traveled for so many 
years and that came together in the end under such pathetic cir- 
cumstances. Mr. Green, of course, took an interest in his fortune. 
He was by no means a ne’er-do-well. But he was content to instruct 
his broker from a pleasant lounge in a London club. His wealth 
was large and he fully lived up to the prenuptial contract under 
which he was to meet all living expenses. His wife was able to 
devote herself to business under what must have seemed to her 
almost ideal conditions — making great profits and spending noth- 
ing. She ruled her own finances with an iron hand. But she was 
acutely aware of the differences in temper, in tastes, in aims, and 
in modes of life between herself and her husband. She grew to 
dislike England, and when her son was still under ten she de- 
manded that the family return to the United States. 




A few years after their return to America the Greens began 
living in separate quarters. There was no scandal about it. There 
was no quarrel. There was no legal separation. They did not 
become estranged. They merely took up separate abodes. 

Thereafter she took an office in the building of the Chemical 
National Bank and gave herself up wholly to building her great 
fortune. And as this fortune grew the fear of assassination took 
deeper hold of her mind. She intimated more than once that it 
was this fear that led her into all the penurious ways she adopted 
to conceal, perhaps, her identity and wealth. But on every hand, 
in every dark corner, she saw the assassin lurking. She declared 
that in a boardinghouse in Brooklyn she found ground glass in 
her food. She lived for a while at a house in Hempstead, Long 
Island. One night burglars broke in. Mrs. Green insisted they 
were not burglars but murderers come to kill her. As she walked 
along the street one day a shower of bricks fell from a building 
on the sidewalk around her. She was untouched. Again the mys- 
terious scoundrels were at work. On another occasion a huge block 
of wood fell from a house in course of construction. It dropped 
at Mrs. Green’s feet. Another miraculous escape. Certainly who- 
ever these would-be assassins may have been they were sorry 
bunglers. But her soul grew darker and she managed to infuse 
this fear of assassination into the minds of her children. 

Some years later her son’s leg had to be amputated. This she 
attributed to an assault years before upon the boy by her own 
enemies. Dr. Lewis A. Sayre, of New York, however, told a dif- 
ferent story. One day a shabbily dressed woman with a boy whose 
knee was badly infected entered the doctor’s office. The boy had 
bruised it some years before, she said, while sliding down a hill. 
She herself had treated the injury which remained an open and 
troublesome sore. Finally she applied hot sand to it, causing the 
flesh to slough off. Dr. Sayre, supposing the woman to be in dire 



poverty, took the boy to Bellevue as a charity patient. Because 
the injury had certain interesting professional aspects the boy, 
with the mother’s consent, was used for a demonstration at which 
the doctor lectured to the students. After this Dr. Sayre learned 
his shabby patient was none other than Hetty Green. He there- 
upon refused to treat the case further until she paid for his services 
and in advance. This she refused to do and never returned. Some 
years later this leg was taken off. 

Another blow was now in store for her. In the year 1884 Mr. 
Edward H. Green sat in an easy chair in the Union League Club, 
his favorite lounging place, discussing the very lively political 
campaign then in progress between James G. Blaine and Grover 
Cleveland. Presently a messenger handed him a letter. Mr. Green 
read it, passed his hand over his darkened brow, and went out 
of the club hurriedly. That night when the evening papers arrived 
his cronies learned why he had left so hurriedly in the afternoon. 
The brokerage house of J. Cisco & Company had failed. Green 
was deep in the market, and the prospect of a Democratic victory 
had caused a slump. He was called on to make good his obligations 
and could not do so. His securities were thlrown on the market, 
and when all the smoke had cleared away, h: s fortune, amounting 
then to $800,000, was swept away. The husband of Hetty Green, 
who had been commissioned to guard her fortune, was bankrupt. 

She resolutely refused to aid him. There is reason to believe 
that she did pay his debts, but she would give him no money to 
recoup his losses. Thereafter he did not have a penny. He was 
sixty- three years old and accustomed to indolence. His outlook 
was hopeless indeed, save as a pensioner of his wife. 

She was a warlike spirit, and life now furnished her with plenty 
of battlefields. She crossed swords with some of the most astute 
financiers of the day and never sheathed her blade in battle. One 
day the little Houston & Texas Central Ra lroad swam into the 
news as a bankrupt road. Collis P. Huntington, of the Southern 
Pacific, bought the stock as low as $10 a share. He proceeded to 
reorganize it. The bondholders were asked to turn in their bonds 



and co-operate in the plans. All the bondholders did — save one. 
That one was Hetty Green who held a million dollars’ worth of this 
paper. Huntington tried argument, coaxing, cajolery, and threats. 
All failed. She threw the road into the hands of a receiver, forced 
a public sale, and collected her bonds in full. Thereafter she 
added Collis P. Huntington to her list of hatreds. 

Sometime later, she was found to be in the market, gathering 
in Louisville and Nashville stock. The market woke one day to find 
that Mrs. Green had almost driven this issue into a corner. Later 
still, she did actually succeed in cornering the market on Read- 
ing, and the humiliated he-operators of Wall Street had to come 
with their hats in their hands to the financial ogress in the Chem- 
ical National Bank. 


One cherished dream of her life Mrs. Green now sees blossom- 
ing into perfect fruit. Her son, Edward H. Green, the apple of her 
eye, is fairly launched upon his business career. Though a Quaker, 
he has just been graduated from Fordham College, the school of 
the Jesuits in New York. He has now finished his course as a 
lawyer, is admitted to the bar, and is ready for business. He does 
not practice law, however. Doubtless Mrs. Green’s long career as 
a litigant and her hatred of lawyers has led her to make this boy 
independent of the breed. He will go into business. He will be 
his own lawyer. And he will be the richest man in America. She 
has been preparing him to be what all his ancestors have been 
for two hundred years — good business managers. From his earliest 
years she has taught him the meaning and the value of money. 
She has lectured him about his way of life. When he was grad- 
uated she called him to her office one day. She handed him a 
package. “Ned,” she said, “this package contains $250,000 in 
bonds. Take it to San Francisco and deliver it to the address 
on the outside. But be careful it is not lost or stolen.” 

The first night on the train Ned sat up watching that package. 



For the rest of the trip he kept it in his hands night and day. 
Finally with relief and pride, he handed it safely to the bank official 
to whom it was addressed. The package contained some canceled 
insurance policies. Mrs. Green had given her son a lesson in 

Reporters asked him what religion he followed. “I was born a 
Quaker,” he said, “raised a Protestant, educated a Catholic, and 
by business I am a Jew.” 

She kept him near her for a while, took him to Chicago on 
several large real-estate deals, and initiated him into all the 
methods she employed in the management of her millions. At first 
he went into the office of the Connecticut River Railroad. When 
he was just twenty-one he was elected a director of the Ohio & 
Mississippi Railroad. When he was twenty-four she sent him to 
Texas to foreclose on the Texas & Midland road, a mortgage 
being due her for $750,000. He did so and bought the road in for 
his mother at the sheriff’s sale. Then she wired him: “The road 
is yours. See what you can do with it.” 

He assumed the presidency of this defunct concern. His mother’s 
heart glowed with pride when she could say that her Ned was the 
youngest railroad president in the United States. So far he had 
done only what she made possible for him. But now the breed of 
the Howlands and the Robinsons shone out in him. He made his 
residence in Terrel, Texas, and set about the rehabilitation of the 
Midland. In a few years he had made it the model road of Texas. 

His mother never took her eye off his operations and occasionally 
she intervened with one of her characteristic gestures. In those 
days railroad officials were constantly pestered by politicians for 
passes. Giving free rides on her railroad tortured the soul of Hetty 
Green. And so she had prepared a little card, and whenever a 
politician or anyone else asked for a pass he received one of these 
little cards. It read: 

Monday: “Thou shalt not pass.” Numbers XX, 18. 

Tuesday: “Suffer not a man to pass.” Judges III, 28. 

Wednesday: “The wicked shall pass no more.” Naham I, 15. 



Thursday: “This generation shall not pass.” Mark XIII, 30. 

Friday: “By a perpetual decree it shall not pass.” Jeremiah V, 22. 

Saturday: “None shall pass.” Isaiah XXIV, 10. 

Sunday: “So he paid the fare thereof and went.” Jonah I, 2. 

What is more, her son had made himself a figure in Texas public 
life. He possessed a fine commercial mind, like his mother’s. But 
he had also the genial, kindly suavity of his father. And before long 
the country was interested to read that the son of the world’s 
richest woman was running for governor of Texas on the Repub- 
lican ticket. Of course a Republican nomination was merely a kind 
of laurel wreath of personal popularity or a key to unlock a rich 
man’s pocketbook. 


One of the powerful emotions that controlled Mrs. Green’s life 
was her hatred of lawyers. To her dying day she would talk with 
anyone by the hour about lawyers. Once she took out a permit for 
a pistol. It was really because of her fear of assassination. Someone 
asked why she had done this. “To protect myself from the law- 
yers,” she answered. “I am not afraid of other kinds of burglars.” 

Her favorite joke, that she would tell upon the slightest provo- 
cation, went this way. 

“Why,” she would ask, “is a lawyer like a man who is restless 
in bed?” 

When no answer was forthcoming she would answer her own 

“Because both lie first on one side and then on the other.” 

This hatred of lawyers grew out of the long series of lawsuits 
that had begun following her aunt’s death and that never ended 
until her death. She was in incessant legal controversies with all 
sorts of people about all sorts of things. In spite of her conviction 
that all lawyers and all judges were scoundrels, no one in America 
applied for the services of these gentlemen more than Hetty Green. 
But the greatest of all her lawsuits, next to the famous will case, 



was the one that grew out of charges against the trustees of her 
father’s estate. 

It will be recalled that during all these years her father’s and 
aunt’s estates remained intact. Trustees administered them for her 
benefit. There was something a little ludicrous in this woman, be- 
yond doubt the most astute financial mind that her sex has ever 
produced, having her funds in the hands of guardians who were 
supposed to protect her. 

At all events, in 1892 the sole surviving trustee of her father’s 
estate, Henry A. Barling, applied to the New York courts to be 
discharged from his trust. He rendered an accounting. And this 
accounting Mrs. Green contested. She made many extravagant 
allegations. She declared her father left an estate of $9,000,000, 
that she received only $334,000 income from the trustees, that 
Barling had been just a clerk in her father’s office, and that undue 
influence had been used by him to get control of the estate. She 
went through the accounting with a fine-tooth comb and made 
innumerable objections to all kinds of items. The whole subject 
was referred by the court to a referee and thereafter for a long 
time testimony was taken before him. 

Nothing could give a better picture of this remarkable woman, 
her appearance, her habits, her manners, her aggressive and im- 
perious nature, her swift wit, and her withering sarcasm, than an 
account of this trial. At the time, the newspapers made it a matter 
of daily extended reports and got all sorts of vivid and entertaining 
news from it. 

The referee was a little, round, pink-faced lawyer of the mildest 
type, named Henry H. Anderson. He returned from luncheon each 
day looking a little rounder and pinker than before. And invariably 
within half an hour after resuming proceedings his head would 
droop forward a little and he would sink into a gentle doze. 

Mrs. Green herself was always in attendance and very much in 
evidence. At this time she had perfected that appearance of shabbi- 
ness which marked her for the rest of her life. Her dress was of the 
poorest materials, black but already revealing tints of green such as 



one sees in an old umbrella. A cape of the cheapest fur covered the 
rents and patches. On her head she wore a little bonnet held on 
with a stringy ribbon tied under the chin. This bonnet she had 
worn for ten years and insisted she would wear it for another ten. 
Over her whole person, her dress, her cape, her bonnet, and over 
her face itself there seemed to have settled an ashen dust that com- 
pleted the utter destitution of her appearance. Behind all this 
squalor, however, was a spirit of indomitable resolution. Her eyes, 
steel gray with just a glint of blue, burned with the brilliance of 
black eyes and looked out with the sharpness of two steel points. 
The skin itself was quite pink and her mouth thin, but large, firm, 
and resolute. 

Against her and representing the executor was no less a per- 
sonage than the distinguished Joseph H. Choate, later to achieve 
world renown as the American Ambassador to Great Britain. 
Choate was a masterful lawyer. But he was hardly a match for the 
terrible figure he now opposed. Mrs. Green would address him as 
“Choate” or “Joe Choate,” very much to the impairment of his 
dignity. She had known him as a girl. One day in a recess she was 
fulminating against him. 

“That’s little Cupid Choate,” she said with sneering laughter. 
“Why when I was a girl Joe used to call on me and whisper little 
love tales to me. He used to call on another girl too, named Kitty 
Wolf, and tell her the same tales. We used to meet every Friday 
and compare notes. We called him Cupid Choate. But now I call 
him Cherub, because he isn’t exactly a cupid any longer. He is a 
reformer now and his wings have begun to sprout.” 

Hardly had the referee begun to doze, when Mrs. Green would 
say aloud: “Look at that man. I’m paying fifty dollars a day for 
him to sleep.” Whereupon there would be a laugh and Mr. Ander- 
son would awake with a start. 

She changed lawyers so often that the proceedings were very 
much delayed. One day she dismissed one lawyer, William H. 
Stayton, in open court. Stayton was her husband’s lawyer also. 
He got up to address the court. She waved him archly away and 



said: “I don’t want any traffic with you. Charles W. Ogden is my 
lawyer now. My son sent him to me from Texas. He’s a good 
lawyer, too. He can beat Choate. He’s a regular Texas steer, but 
I don’t know whether he’ll be able to live through this thing.” 

The referee complained that Mrs. Green, as soon as a lawyer 
became familiar with her case, dismissed him. 

“When they get hypnotized, don’t I have to change them?” she 
said. “Choate hypnotizes them. He hypnotized Stayton.” 

Another day Referee Anderson attempted to rebuke her. 

“Hear that,” she exclaimed. “He’s mad because I said he snored 
last Saturday. Well, the only difference between us is that Anderson 
snores and I get nightmares.” 

Mr. Anderson rapped sadly for order. What was mortal man to 
do with such a litigant? Then a question arose over the books of 
the estate. 

“The books,” said the executor’s lawyer, “must be kept at the 
office. This is not a small estate — ” 

“But getting smaller every minute,” shot out Mrs. Green. 

The referee looked helplessly at her: “There’s no use, Mrs. 
Green, adding more — ” 

“Except a little money,” she put in. “I’d like to see a little more 

Later her lawyer, cross-examining the executor on the witness 
stand, said: “Don’t you know that your fellow executor, at the 
time that letter was signed, was in a lunatic asylum?” 

“It was not a lunatic asylum,” retorted Mr. Barling angrily. 
“I’ve been there myself — ” 

“Why not?” interrupted Mrs. Green with a loud laugh. 

“Visiting,” added the embarrassed witness, turning red. 

A moment later Mr. Barling’s lawyer went to the witness chair 
and to look over some papers the witness was examining. The heads 
of lawyer and witness were close together. 

“Look at that,” snapped the terrible Mrs. Green, “a two-headed 
witness. That ought to be in a dime museum.” 

For months this travesty went on, lawyers, witnesses, referee 



struggling to push ahead and riddled by the machine-gun fire of 
Mrs. Green’s withering jibes, while all New York laughed. The 
utter frustration of her foes came, however, toward the end of the 
trial when the referee’s report had been made against her and the 
matter was being argued before the court. Joseph H. Choate was 
addressing the judge. He was picturing the sufferings of the sorely 
tried executor who went on with his burdensome duties under the 
load of Mrs. Green’s incessant criticism and obloquy. He grew 
eloquent. He was sailing aloft along an altitudinous level of forensic 
pathos. Suddenly the judge, the spectators, and the lawyers became 
aware of Mrs. Green drawing a huge yellow pillow slip from under 
her cape, putting it to her eyes, and bursting into a violent bur- 
lesque of weeping at Choate’s heartbreaking eloquence. The scene 
was so lugubrious that judge, lawyers, all broke into violent 
laughter that continued in ceaseless titters for the balance of 
Choate’s address. The great lawyer for once was utterly crushed. 

If Mrs. Green hated lawyers before this suit, she regarded them 
with a deeper and blacker hatred forever after. She had scored 
brilliantly on the entertainment side, but in the end she lost this 
case as she did most others. Almost all great financial figures have 
managed to get themselves into court a great deal. John D. Rocke- 
feller was in endless litigation. But Rockefeller always won his 
suits. Mrs. Green always lost hers. 


There is a little double flat in Hoboken in Bloomfield Street — a 
two-family house bearing the number 1309. In the parlor of the 
lower flat are three chairs, a table, a couch, and a rug somewhat the 
worse for wear. There is an old vase on the mantel holding aloft 
some artificial flowers. Over the mantel hangs an oil chrome, and 
there are a few other cheap framed prints on the other walls. This 
is the living room of Mrs. Hetty Green, the richest woman in the 
world. If, as the Germans say, “true wealth is to have everything 
you want,” then Mrs. Green, in addition to her money, is rich 



indeed. For this is all she wants. She has another home at Bellows 
Falls, her husband’s native village. She goes there for a few weeks 
each year. In Wall Street it is said she maintains this as her legal 
residence in order to escape New York taxation. But her home 
throughout most of the year is in Hoboken. 

One might see her any morning at seven o’clock closing the door 
of this humble home behind her as she leaves for business in New 
York City. She says good-by to a little dog named Dewey. She 
calls the dog Cupid. His name is Cupid Dewey. In the little tin 
frame on the door under the electric push button is a soiled card 
on which is written what purports to be the name of the occupant 
of the flat. It is C. Dewey. This is a grim mixture of Mrs. Green’s 
sardonic humor and her terror. She foolishly imagines she is hidden 
away in this remote tenement. Everyone knows where she lives. 
However, she has other reasons for dwelling amid the secluded 
fastnesses of Hoboken. “It is the cheapest place to live I know 
of,” she once said of it. 

As she goes to the ferry she is indescribably shabby. Her old 
clothes hang about her as if they were wet. This is part of her 
disguise. Yet on the ferry everyone recognizes her. “There is Hetty 
Green, the richest woman in the world,” is said a score of times 
every morning. 

Once in Manhattan, she goes to her office in the Chemical Na- 
tional Bank building. It is on the second floor of the bank — a large 
room with heaps of papers piled all around. There is no rug on 
the floor and an air of bareness and age about the whole place. In 
her office she changes her clothes. She puts off the raiment of the 
beggar and dons a less seedy costume. But it, too, is faded, worn, 

Here at this desk she transacts her business. Here come bankers, 
brokers, corporation presidents, church pastors, men of all sorts 
who want money. Over that desk millions flow every week. The 
most imposing and stately gentlemen in America — men who live 
in mansions, sail the seas in yachts, preside over vast industrial 



enterprises, operate vast railroads — all owe money to the squalid 
old woman who lives in the Bloomfield flat and whose only yacht 
is the Hoboken ferry. 

The meanest forms of economy permeate all departments of 
this woman’s life. Her business is transacted on the same basis. 
One day she was in Philadelphia and wanted to get to New York 
before the close of the Stock Exchange. It was necessary to have 
a special train. The railroad authorities quoted her a price for a 
locomotive and one car. The price staggered her. She tried to 
bargain with them but they informed her the price was standard 
and could not be lowered. 

“All right,” she said, “take the car off the train and five dollars 
off the price and HI ride in the locomotive.” And this she did. 

At Bellows Falls one day she wanted to buy a horse. The owner 
asked $200 for it. He refused to lower his price. She went to a 
person who had been a lifelong enemy of the horse owner. She got 
all the particulars of his life, went back to him, and shocked him 
by revealing what she knew of his past. She offered him $60 and 
he took it. Afterward she laughed, saying she would have been 
willing to pay $100. 

In New York she ate at cheap restaurants where she was known 
to waiters as the woman who never gave a tip. But at Bellows Falls 
she went each day to the town shops and bought in small quantities 
just what she needed for that day — a quarter pound of butter, a 
few crackers, a small quantity of sugar. She could never speak with 
patience of the extravagance of women. Whenever conditions were 
depressed in the country she blamed it on the extravagance of 
her own sex. 

One day she went to a real-estate office on Fifth Avenue. The 
office had advertised for several caretakers to live in the basements 
of tenement houses belonging to the firm. All day long, forlorn old 
women had been coming in applying for the job. When Mrs. Green 
entered the young clerk flew at her and cried: “No more caretakers 
needed! No more caretakers today!” Mrs. Green was not in the 



least perturbed. She replied in her soft, smooth voice: “I am Hetty 
Green. I came here just to talk over a loan of half a million dollars 
your firm wishes to borrow from me.” 

She was wholly without that frailty which Saint Francis so 
abhorred — the sin of human respect. And above all things Mrs. 
Green hated a snob. On her place at Bellows Falls she had a cow. 
One day a very haughty English visitor crossed the lot and was 
promptly pursued by the cow. Much upset by his precipitate and 
graceless flight he went to Mrs. Green. 

“Madam,” he said, “your cow has chased me across the lot.” 

Mrs. Green surveyed him calmly but made no reply. 

“Madam!” he fumed, drawing himself up in all his disheveled 
dignity. “Do you know who I am? I am the Honorable Vivian West- 
leigh of London.” 

“Go tell that to the cow,” she said quietly. 
vm — 

At a comfortably late hour Mr. Edward H. Green rises in his 
apartments in the Cumberland Hotel. He is an old gentleman now 
some seventy-five years of age. He is still a tall, erect, distin- 
guished-looking man, with a portly figure. He has his breakfast in 
his room and then looks carefully over his morning papers. He 
does not miss a page, scanning all the small items. Now he frowns 
darkly. He has come upon some little note about his wife. He is 
deeply displeased at this. But for all that he reaches for his shears, 
clips the item out, and puts it carefully in an envelope along with 
innumerable others. 

No one but his most intimate friends are permitted to enter this 
room. But many try to reach him. Reporters occasionally present 
themselves at the clerk’s desk of the Cumberland. There is a good 
deal of mystery about the husband of the world’s richest woman, 
and reporters are forever trying to get to him for a little chat. The 
caller’s card is taken away and in a moment the attendant returns 
to say that Mr. Green begs to be excused. The card has never 



reached him. The attendants at the hotel are liberally tipped by 
Mr. Green to protect him from all visitors save two or three who 
are known. 

When he is through with his papers he amuses himself with a 
book until about one o’clock. Then he dresses and walks leisurely 
to the Union League Club where he spends the rest of the day. 
There he meets his familiar cronies who can be depended upon not 
to mention his wife. He plays a hand at cards, smokes a cigar or 
two, enjoys the conversation of friends, has his dinner, and remains 
into the night when he goes back to the Cumberland, save on those 
rare occasions when he goes to the theater. 

He is now a man of leisure living on a pension allowed him by 
the wife who had forced him to sign a prenuptial contract that her 
funds would not be liable for his debts and that he would support 
her. The allowance was not a large one, but it enables him to live 
at a decent hotel and support by careful management the wants of 
a clubman. But he never attempts speculation again. 

There is, however, one fly in the ointment. His wife exercises 
over him a surveillance which is most distressing at times. He 
becomes aware of her unseen presence through inquiries made by 
her in the most unexpected places. Thus one day Mr. Green went 
to the Bureau of Elections to register. He learned that his wife had 
been there before him to find out if he had made a change in his 
voting residence. These investigations of his wife are the chief 
reason for his careful arrangements to keep out all visitors. Perhaps 
this once wealthy man feels a little uneasy to be the guest of the 
Cumberland and the lounger at the Union League while the bills 
are paid by the shabby woman in the Hoboken flat. 

Meanwhile, Mrs. Green’s fortune is rising. Her business is 
money — making dollars into more dollars. She was not a builder. 
She projected no great productive industry. Her business was to 
stand on the side and take her toll from those who were producers 
and builders and needed her money. Most of the great millionaires 
of this country have been primarily creators of wealth, dreamers of 
great enterprises. Rockefeller organized the oil industry, Hill 



created a railroad empire and developed a vast region, Carnegie 
put together that amazing system of industries that became the 
foundation of the United States Steel Corporation, Ford raised up 
a great network of wealth-producing plants that employ hundreds 
of thousands of men. Hetty Green never created a dollar. 

Of all American millionaires the one she resembled most was 
Russell Sage. Her investments were made largely in government 
bonds and real-estate mortgages. Her speculative profits were made 
in the call-money market and in buying high-grade securities when 
the market was low and selling when it was high. This simple 
process, which everybody pretends to understand but so few follow, 
she began in early life when she gathered in government securities 
after the war. In Wall Street they would tell you that Hetty Green 
made her money through luck. But there was no luck in it. It was 
in following the obvious principle that Wall Street preaches and 
then ignores. She always insisted she never speculated. (It is odd 
how everyone fights shy of that word.) As a matter of fact she 
seldom bought anything to hold. 

“There is a price on everything I have,” she once said. “When 
that price is offered I sell. I never buy anything just to hold it.” 
This was in striking contrast to the investing philosophy of 
George F. Baker. When asked what he considered the right time 
to sell stocks he replied: “I don’t know; I never sell anything.” 
“About all that can be said of my investments,” said Mrs. Green 
on another occasion, “is that they have been carefully chosen and 
have turned out well as a rule. A fortune cannot be built up around 
a fixed idea or in other words without the exercise of just plain 
common sense. I buy when things are low and nobody wants them. 
I keep them until they go up and people are anxious to buy.” 
Then she added: “I never speculate. Such stocks as belong to 
me were purchased simply as an investment, never on margin.” 
What she meant was that she never speculated unwisely. After 
the panic of 1907 she said: “I saw this thing coming. When it 
came some of the solidest men in Wall Street came to me and 
tried to unload all sorts of things, from palatial residences to auto- 



mobiles. When the crash came I had money and I was one of the 
very few who had. The others had their securities and their values. 
I had the cash and they had to come to me.” 

Her real-estate holdings were vast. She owned or had mortgages 
on an endless number and variety of places — great business build- 
ings, palatial city homes, theaters, factories, hotels, livery stables, 
country estates, farms, ranches, undeveloped acreage, churches, 
and cemeteries. Once she decided to make a personal tour of in- 
spection of all her real-estate investments, and it required two 
years of constant traveling all over the country to visit them all. 

What she was worth it would be difficult to say. She always 
preserved the greatest secrecy about her wealth. She was equally 
secret about what she bought. If she was asked what was a good 
business to invest in she would reply: “The other world.” One 
estimate of her wealth placed her New York City realty invest- 
ments at between 30 and 45 million dollars. She owned from 40 
to 60 millions in industrial and mining securities. She had from 1 5 
to 25 millions in railroad stocks and bonds, about 10 millions in 
farm and other tracts in the Southwest, and another 10 millions in 
Boston, Chicago, and St. Louis real estate. Around 1900 her 
wealth was not less than 60 million dollars. By the time she died it 
had certainly doubled. 


And now on the door of the small flat in Hoboken the name of 
C. Dewey is still in the little tin frame. But in the frame just above 
it is another name. It is that of E. Green. This is none other than 
the expansive and genial clubman and former millionaire, Edward 
H. Green. He is now past seventy-eight, ill, feeble, weary. At last 
he has been brought down to the dingy level of his wife. His old 
apartments at the Cumberland have been abandoned. He is done 
with the Union League Club. He is too old and broken to go on 
alone. Now he occupies the little flat above his wife’s. 

It is difficult to say precisely what were the feelings of this self- 



willed woman toward this fallen man. He was really never quite 
out of her thoughts. Even while away from her she exercised a 
ceaseless vigilance over him. She was a hard woman. She was never 
swayed in her actions by watery human sympathies. This man and 
this woman, brought together in their maturity, looked out upon 
life through eyes so different that what they saw constituted two 
wholly different worlds. She had no patience with the things that 
attracted him. His loss of a whole million dollars must have tor- 
mented her soul. And yet there is some reason to believe that now 
as she saw this once strong and handsome man brought so low she 
felt a glow of affection for him. Their daughter Sylvia remained in 
Hoboken to look after her father, and Mrs. Green proceeded, as 
was her way, to boss with an iron hand the job of nursing him. 

After a while, perhaps early in 1902, the family, doubtless at 
the insistence of the children, moved him to his old home at 
Bellows Falls. He was now a man of eighty years and utterly with- 
out spirit. His daughter now remained with him altogether. Mrs. 
Green moved her office to Bellows Falls and tried to stay there too. 
But it was a most inopportune time for him to choose to die. That 
was a year of extraordinary prosperity. A new race of daring pro- 
moters was in the field — the Harrimans, the Gateses, the Rogerses, 
and their like. Also a new breed of dangerous and brilliant radicals 
were on the warpath. It was a time when people of vast wealth had 
to watch their stations with ceaseless vigilance. William J. Bryan, 
Eugene V. Debs, Tom Watson, all pointed their fingers frequently 
at Hetty Green as the symbol of useless and parasitic wealth. Be- 
sides, the call-money market was running wild. Rates were going 
high, and there was big money to be made by sitting close to Wall 
Street. Hetty Green had raised the towering structure of her fortune 
so high that she had to be patrolling it always to keep it from rust 
and loss. 

And so while the indomitable wife labored night and day with 
her far-flung interests, the shadows gathered around the man who 
thirty-five years before had been chosen to guard her fortune. Now, 
utterly broken in spirit, Edward H. Green died on March 19, 1902. 




The Robinsons and the Howlands and the Greens had all been 
precocious in the making of money. But they had displayed no 
precocity in love. The elder Green had not married until he was 
forty-seven. His son, Edward, remained single until after his 
mother’s death, until he was forty-seven — the age at which his 
father married. Mrs. Green was thirty-three before she married, 
and now her daughter at thirty-eight was still unwed. In 1909, 
however, Mr. Matthew Astor Wilks, a clubman of prominence and 
a grandson of John Jacob Astor, approached Mrs. Hetty Green 
and asked for the hand of her daughter Sylvia. Mr. Wilks had 
been paying court to the lady for some ten years. But he had been 
always painfully aware of Mrs. Green’s opposition to his suit. And 
she was not a figure to be approached upon an unfavorable subject 
with impunity. However, early in February, 1909, Mr. Wilks pre- 
sented himself to his future mother-in-law. He was plainly getting 
on in years. Really his proposal could hardly be deferred longer. 
When he laid the matter before Mrs. Green her answer was char- 

“You are sixty-five years old, Mr. Wilks,” she said, “and you 
have got the gout, if you’ll excuse my plain language. I think 
Sylvia ought to marry a younger man. I have no doubt you will 
treat her well. But, to speak plainly again, I’d like an heir to my 
estate, which will be Sylvia’s when I am gone.” 

Nevertheless she relented when she found the young turtle doves 
quite determined. The wedding was fixed for February 23 — just 
ten days away. Mrs. Green, with her wonted vigor, proceeded to 
boss that job, too. As arrangements progressed and she found her- 
self superintending the purchase of the trousseau — spending money 
quite lavishly — she experienced a strange thrill in this extrava- 
gance. Despite much secrecy the news got out and promptly the 
Bloomfield Street flat was besieged by reporters. The day of the 
wedding they were camped in numbers outside the house. In some 



way, however, the family managed to escape unseen, get into a 
hack, and drive to Morristown, New Jersey. Soon after the re- 
porters discovered they had been tricked, they commandeered 
cabs, carts, milk wagons, every species of vehicle and attempted 
pursuit but without success. At the church of St. Peter in Morris- 
town, with but sixteen or eighteen relatives present, Hetty Sylvia 
Ann Howland Green gave her hand to Mr. Wilks. Perhaps for the 
first time in thirty years Mrs. Green put aside her shabby old 
clothes. She appeared, radiant, in a new black-silk dress and with 
a hat, rather than a bonnet, beaming with red flowers and an 
ostrich plume. And she gleamed with diamonds. Always she owned 
diamonds. She bought them as she bought stocks, to hold until 
someone wanted them at an advanced price. Now they came in 
handy to adorn her at the wedding. 

By the time the Great War broke Mrs. Green’s health had begun 
to fail. She was then eighty years of age. In spite of her regular 
habits she had driven herself with work. Besides, her fortune was 
now reaching gigantic proportions. She had always scorned those 
modern innovations in office management for the control of de- 
tails. She trusted few employees. All the threads of her varied and 
widely scattered interests she held in her own strong hands. The 
hands were tired. But she held on firmly and refused to rest. 
Someone asked her if she thought of retiring. “Retire!” she ex- 
claimed. “Why should I give up work? I was never more capable 
of managing my affairs. Besides business has become a habit after 
so many years.” 

But for all that she began to reach out for help. Her son had 
already been summoned back to New York gradually to take hold 
with her of the reins of her interests. He had many interests of his 
own by this time. He was a bachelor of wealth and culture. Unlike 
his mother he had a whole collection of hobbies. Chief among them 
was flowers. His mother still had her little artificial bouquet in the 
vase on her mantel. At Dallas he had a huge nursery. He was an 
enthusiastic fisherman and organized the Tarpon Club of Texas. 
He was a yachtsman and owned a palatial vessel. He took up 



aviation and formed an aviation club in Texas. A lover of life, he 
was now called from all this in Texas to associate himself with his 
grim mother. She had formed* the Westminster Company, giving 
him half the stock to assist in the management of her business. 
Later she set up the Wyndham Corporation to take over her real- 
estate mortgages and interests. 

But she continued to be the directing genius of her affairs. In 
1915, in the excitement of the stock market when the European 
war began to stimulate business here, she loaned millions on call 
at twelve per cent. She began to take an interest in stocks new to 
her. She worked ceaselessly putting her fortune into such shape 
that it might be least affected by the tax gatherer. 

On April 17, 1916, she was felled in her Hoboken flat by a para- 
lytic stroke. She was eighty-two years old. Nevertheless she rallied 
and, after being removed to her son’s home at 7 West Ninetieth 
Street, recovered rapidly. Her old hatred of extravagance flamed 
up in her new surroundings. To provide her with two nurses her son 
had to introduce them into the household under the guise of seam- 
stresses. Daily she got reports upon her multitudinous affairs. 

But she began for the first time to sense that her own end was 
near. She looked this grim fact in the face without fear. 

“I am not worrying,” she said. “I do not know what the next 
world is like. But I do know that a kindly light is leading me and 
that I shall be happy after I leave here.” 

One day, on returning from a ride in Central Park, toward the 
end of June, a second stroke laid her low. In spite of this, her 
unconquerable spirit flared up anew. But she knew that death 
stood at her elbow. And she was quite unperturbed. The glittering 
mass of her countless dollars drew dim. Her bonds, her buildings, 
her stocks, her beloved mortgages, all now seemed thin and unreal. 
On Monday, as the first flow of dawn came into her room, she 
showed signs of sinking. The doctor was sent for. The weary 
countenance and tired, half-closed eyes presaged death. But her 
pulse was strong. The iron engine inside refused to be stilled. The 
doctor felt her pulse. “She will live out the day,” he said, and left. 



In half an hour Hetty Green, rid of her millions, her old, black, 
faded dress, stripped even to the soul, had gone to some other 

She was laid in the cemetery at Bellows Falls beside the man 
whose name she bore and whom she had known so little. 


Mrs. Green’s death was the signal for one of the most extraordin- 
ary spectacles ever witnessed in a probate court. It will be recalled 
that Mrs. Green had inherited a portion of her Aunt Sylvia Ann 
Howland’s estate amounting to a little over a million dollars. This 
sum, however, was not given to her outright. It was put into a trust 
fund with instructions that the income was to be paid to Mrs. 
Green during her life. After her death the whole amount was to be 
divided “among the lineal descendants of my grandfather, Gideon 
Howland.” Gideon Howland had been dead for nearly a hundred 
years. And now Miss Sylvia’s estate was released for distribution 
among all the descendants of the old whaling merchant, and they 
had been multiplying with extraordinary rapidity for a century. 

The earth seemed to open and cast up heirs. They came 
pouring as if answering the trump of doom into the Valley of the 
Last Judgment. They came from the four corners of the globe. 
The terms of the will had always been known, and this horde of 
claimants had sat about waiting with growing impatience for the 
passing of the almost indestructible Hetty Green. 

Mr. William M. Emery, an accomplished journalist and genealo- 
gist of New Bedford, has written a whole book about these heirs 
and this famous will. In 1918 he found living 1478 direct descend- 
ants of Gideon Howland. The lawyers set up a genealogical bureau 
to determine who were the rightful inheritors. When the work was 
concluded Miss Sylvia Ann Howland’s estate was divided among 
some 438 rightful claimants. This came pretty close to a sociali- 
zation of wealth. Some got minute fractions, one heir getting one 
seventh of one half of one thirty-second of one forty-fifth. The 



curious reader with a flare for mathematics may figure that out 
for himself. 

No woman was ever more generously provided with guardians 
than Hetty Robinson in her young womanhood. Her father left 
most of his estate in the hands of trustees. Her aunt left all of 
Hetty’s inheritance in the hands of trustees. Her husband was 
selected as a prudent businessman who would aid her in managing 
that part of her fortune which was put into her hands. It is inter- 
esting to contrast the work of the guardians provided for this 
innocent, unsophisticated woman by the wise men of her race. The 
aunt’s estate after fifty years was hardly a dollar greater than it 
was at the start. The father’s trustees had actually achieved a 
shrinkage in his trust fund. Poor Edward H. Green was allowed 
to furnish no guardianship to Hetty’s own money and as to his own 
he became a bankrupt. Mrs. Green herself took her original million 
dollars and turned it into more than a hundred million — two hun- 
dred million, some have said. Her estate was divided between her 
son, Edward Green, and her daughter, Mrs. Matthew Astor Wilks. 

Interlogue Two 

— i — 


There can be little doubt that Hetty Green satisfied most of the 
elements in the definition of a miser. Whatever other ingredients 
this definition ought to contain, certainly a French version — liter- 
ally translated — is not amiss: “The love excessive of the silver for 
it to accumulate.” 

Love of money is a spiritual malady that runs through almost 
all the persons who are the dubious heroes of these chapters. A 
common observation about men of wealth in which their eulogists 
indulge is that they “care nothing for money,” that they are inter- 
ested rather in the things — with the emphasis on the good things — 
they can do with money. Rockefeller said he looked upon himself 
as a trustee of his money — God’s trustee. “God gave me my 
money,” he exclaimed. His great aim was to use it according to 
God’s will. Certainly much can be said for the wise use which 
Rockefeller, among all his multimillionaire contemporaries, made 
of his money. But one may well indulge in a mild surprise on 
learning that all the stratagems Mr. Rockefeller employed in gath- 
ering his riches had the complete approval of his Divine Partner. 

The insistence that these rich men “do not love money” is prob- 
ably made to counteract the impressions made by those misers of 
fiction and the stage who rub their hands and drool in obscene glee 
over the little heaps of gold coins — “my little shining darlings.” 
The dramatists, from Plautus’ Euclio to Moliere’s Harpagon and 
the trembling wretch in The Chimes of Normandy, have estab- 




lished in the common mind a fixed pattern of what the expression 
“love of money” means. 

As a matter of fact, few persons, save perhaps some who are 
mentally diseased, suffer from the sheer love of the metal we call 
money. Money itself is merely one form of property. And what 
these rich men have in varying degrees of virulence is the urge of 
acquisitiveness — the relentless and forever gnawing appetite to 
add more and more to what they already possess. And this urge 
arises, not out of any special affection for the physical possessions, 
but from certain special uses to which they hope to put these 
possessions. They want power. They want security. They want 
glamour. And mixed up with this they have a special talent for 
accumulation which, like all persons who have special and strong 
talents, they love to exercise. They find the same delight in the 
patient, ceaseless planning and execution to make a profit as others 
do in winning a game of tennis, achieving a low score at golf, or 
managing large bodies of men in military formations. 

All sorts of men want power or want pleasure or want acclaim. 
But there are all sorts of ways of achieving power, getting pleasure, 
and winning acclaim. Acquisitive men want the kind of power, the 
sort of pleasures, and the brand of acclaim that can be purchased 
with riches. All of them, incidentally, do not have the same ac- 
quisitive abilities and, of course, all do not want the same thing. 
Many of them do not want much more than security. They start 
out in life with little, or at least some of them do, and acquire 
much, not through any great ability as producers, but by dint of 
incessant, patient, remorseless saving and stinting. The miser, 
therefore, may be said to be an acquisitive man who shrinks from 
spending. He is a getter, a saver, but not a spender. 

Upon examination one is impressed with the fact that most 
misers are not to be found in any sort of industrial or commercial 
enterprise, but rather in some business that has to do with the 
handling of money. The talent for business is not a simple affair. 
One man is a good salesman, another a good merchandiser, another 



an excellent manager of men, another has a talent for finance. The 
misers are usually found among those who have this talent for 
finance. In some it is great. In others it is meager and, as a rule, 
at least so I conclude, the misers will be found among those whose 
talent in handling money is meager. 

When we have the man or woman with the acquisitive urge but 
no special capacity for making money by producing wealth or 
managing large enterprise, with a bent for finance but not very 
much talent in that direction, and all this coupled with a powerful 
element of fear — fear of destitution — we have the authentic miser. 
For then he supplements his moderate power to earn by an abnor- 
mal passion to save, to deprive himself and his family of the 
necessities of life even, to say nothing of its decencies, in order to 
accumulate a fund against the day of want. 

Some years ago police entered the home of a carpenter in 
Brooklyn. The children had gone without food for two days. They 
had no shoes. Investigating, the police found a thousand dollars in 
bills in a small tin box in a pocket of the father’s coat. When 
asked why he did not give some money to his wife, he replied in 
amazement: “Oh, nol I’m saving that.” Saving it, doubtless, 
against the day of want — a day of worse want than that which 
was then in his home. Lady Gregory, the writer on Irish folklore, 
touches, if whimsically yet closely, the germ of this. She tells of 
the “Man who went beyond the hope of God.” He was a poor 
peasant who had forty-four potatoes and who could expect no 
replenishment of his supplies for forty-five days. He reasoned that 
since there would be one day without a potato he would do well to 
fast on the first day and thus be able to look forward to forty-four 
days of safety. But, alas, he starved the first day. The fear of 
destitution, which is a normal protective caution in all healthy 
minds, expands to abnormal proportions in the minds of men and 
women who are not equipped to combat it by successful accumu- 
lation of wealth. It expresses itself in intense and even degrading 
parsimony. And a person who has cultivated this habit of parsimony 
for many years finds it continuing to dominate the mind even after 



wealth has been accumulated either through grinding savings or 

Daniel Dancer, famous London miser, might well have been sup- 
posed to be relieved from the terror of destitution when he in- 
herited an income of several thousand pounds a year. But he and 
his sister continued to live in squalor, to find their food in refuse, 
to pick up dead bodies of sheep for meat until she died from poison- 
ing as a result. Even then he found a reason not to incur the expense 
of a doctor. That would be interfering with God’s will, he explained. 
What did he want money for? Not power, not glory, not pleasure. 
Only the unconquerable fear of starvation in the end. He lived in 
his wretchedness to an old age and willed his whole estate to a 
wealthy noblewoman who visited him in his illness. 

A somewhat different type of miser was Thomas Cooke of Isling- 
ton, of the early eighteenth century. Cooke was a miser with no 
wealth until he married the widow of a wealthy brewer. But his 
niggardliness remained unaffected and the widow is said to have 
died of starvation not long after the marriage. Cooke took no part 
in the management of his beer making. He continued to assure his 
safety, not by earning more but by stinting on all things. But in 
this case, unlike Dancer, he was fond of the good things of life, 
particularly of good food. He laboriously cultivated many friends, 
visited them much, hinted that their children would be remembered 
in his will, and thus got many invitations to dinners and excellent 
attention. He would, upon occasion, fall down in a simulated fit in 
front of a good home, would be carried indoors, given good food, 
would later call to express his gratitude and his determination 
someday to reward his rescuers, thus getting more good meals. 
Obviously he could have provided himself with an endless suc- 
cession of good meals had he had the talent to apply himself to 
productive business rather than to those humiliating and cheap 
schemes for getting what was so cheap in those days. He would, 
when ill, put on rags and call on some benevolent doctor for aid. 
This will recall Hetty Green’s delivery of her son into the hands of 
a free clinic to be the subject of a lecture because of an infected 



leg, and her refusal to pay a doctor when the clinic physicians dis- 
covered who she was, the whole story ending with the loss of her 
son’s leg. Cooke left a fortune of $650,000 entirely to charity when 
he died at the age of eighty-six. 

Of course, these attributes of the miser assume different shades 
and degrees of meanness. Russell Sage of New York and John 
Elwes of Southwark, England, were not wholly unlike, save that 
Sage was probably softened somewhat by his unusual wife. Sage 
was a character who combined both avarice and parsimony. He 
was what Wall Street called a skinflint. Although at his death he 
left an estate of $66,000,000, he lived with the greatest frugality, 
haggled and bargained, never took a vacation, quarreled with the 
poor apple woman in Wall Street about the price of her apple, and 
angrily bargained like an Oriental peddler with the candy man 
near Trinity Church for a small reduction in price on a slightly 
soiled bar of chocolate. 

He began as a wholesaler, made money as a youth, was elected 
an alderman of Troy and later to Congress. He made a lot of 
money as an alderman unloading a local railway on the city of 
Troy and later is said to have got for himself a large haul when as 
a banker he settled with his depositors in depreciated paper, taking 
the currency for himself. He went into Wall Street, which he 
haunted as a moneylender, speculator, and most of all as a dealer 
in puts and calls for many decades, about the same time that Hetty 
Green moved like a witch through its shadows. 

Sage lived in a modest, yet decent home, was a devoted hus- 
band, and was undoubtedly rescued from more debasing mean- 
nesses through the influence of his wife. It is said that she even 
induced him on one occasion to make a gift of $100,000 to some 
school. He was coldly and cruelly avaricious. If he was not as 
miserly as the wretched Dancer or the shabby Cooke, it was be- 
cause he did possess what they did not have, an extraordinary 
capacity for making money. 

Elwes, in London, did not descend to the same coarse levels of 
meanness as Cooke because he, too, had never known poverty, 



having inherited a fortune from his father at the age of four. He 
came of a family of miserly folk and was congenitally grasping, 
mean, and stingy. Like Sage, he went into politics, being elected to 
Parliament for several terms. Like Sage, he could be guilty of an 
occasional generosity — he made a number of loans to needy col- 
leagues in the House. But, though having an estate of over two 
million dollars, he lived in a small country seat, kept but a single 
servant, never traveled in a coach or entered a hotel, riding instead 
on horseback, detouring through muddy roads to escape the toll 
gate, slept by the roadside, and, when in London, occupied, in- 
stead of a hotel, whatever house or room he could find among his 
numerous properties, got up early in the morning to walk out a 
great distance to buy his meat cheap at the farms. When he died he 
left an estate of $4,000,000. 

Such a man as the Duke of Marlborough had in him some of 
the ingredients of the miser, but they were restrained by certain 
other qualities, such as his enormous interest in military science 
and his ambition for power. He lived in a state befitting his rank, 
but both he and his wife were guilty of an endless number of petty 
meannesses that in the end lost for them practically every friend 
they had. 

Hetty Green, unlike most misers, had an extraordinary genius 
for making money out of money, pursuing relentlessly the crudest 
bargains, squeezing the highest interest rates through the devious 
methods of discounts and fees, watching the market with catlike 
patience for its high points and its low points — buying, as she said, 
low and selling high. But she took an almost fiendish delight in the 
power she acquired over men who called themselves rich and pow- 
erful and who strode about the world in grandeur while she lived 
in a dismal flat in Hoboken. But she was pursued by the haunting 
fear of murder and of losses all her life. 

But none of these persons engaged in industrial enterprises as 
producers of the wealth they craved. They depended wholly upon 
the scheming management of money. 





It is not possible to talk so much about wealth without thinking 
of the reverse of the shield — poverty. There is a widely held, if 
hazy, notion that poverty is not merely the reverse of wealth but 
its deformed child; that it is Dives who has created Lazarus. There 
is another popular conviction that poverty is the creature of the 
machine age; that this blessed miracle of skill and power, the 
machine, turns out not merely our prized gadgets but our disprized 

Certainly poverty is no new phenomenon. It did not come in 
with the machine. In all ages, under all forms of government, in all 
economic systems there has been widespread poverty. So far as 
the machine is concerned, the worst indictment that can be brought 
against it is not that it created poverty, but that it has failed to 
abolish it. 

After all, poverty is not a simple disease. There is the poverty 
that arises out of natural causes — droughts, famines, plagues. 
There is the chronic poverty that afflicts large areas of society even 
in the most favorable times. 

Throughout history poverty has been produced by two causes — 
the convulsions of nature herself and man’s ignorance of his world. 

The story of man’s long and agonizing struggle against nature 
is the most terrible chapter of human history. Almost all the 
countries in the Old World and most of those in the modern world 
have been afflicted so persistently by famine and disease that the 
effect upon their populations has been persistent, filling up the 
intervals between disasters with poverty. The University of Nan- 
king has made a table showing that between 108 b. c. and 
a. d. 1911 there were 1828 famines in China — almost one a year 
somewhere in that unhappy empire. One can understand why a 



polite salutation on meeting a friend in parts of China is “Have 
you eaten?” These afflictions have continued in our time. In 
1920-2 x the drought slew half a million people and rendered twenty 
million destitute. In 1876-79 the area devastated was 300,000 
square miles and the victims from nine to thirteen million human 

These famines were caused by droughts, floods, swarms of lo- 
custs. Concentrated wealth was not responsible, though it may 
have accentuated the suffering. Man did not know how to restrain 
the vengeful hand of cruel nature. His lack of knowledge of the 
forces against which he had to contend, the rudeness of the instru- 
ments with which he worked, his merciless superstitions, his unin- 
telligent social organizations — in a word, his ignorance — accounted 
for his sufferings. 

Concentrated wealth may indeed have aggravated human suf- 
fering. An old Sanskrit chronicle tells us that “the Jelham River 
[in India] was covered with corpses during the drought and the 
land became strewn with human bones like a burial ground. Yet 
the king’s minister and guards became rich selling stores of rice at 
high prices.” 

Agra and Delhi were scourged by a severe famine. The governor 
was Hemu. Of him Badaoni, a contemporary historian, writes: 
“The people died with the word bread on the lips and yet Hemu 
valuing the lives of a hundred thousand men at no more than a 
barley corn, continued to feed 500 elephants upon rice and sugar 
and butter.” 

Abdul Hamid, a native chronicler, writes of a famine in central 
India in 1628-29: “Men devoured each other and the flesh of a son 
was preferred to his love. The powdered bones of the dead were 
mixed with flour.” The Mogul emperor, Shah Jahan, fabulously 
wealthy, heard of these degrading agonies with ten million dollars 
of jewels hung around his neck. The curious insensibility of the 
wealthy rulers to the hunger pangs of their subjects deprived these 
societies of the aid of the only leadership that could ameliorate 
their condition. That condition appalls the mind as we read the 



dreadful record of human degradation under the pressure of 
hunger, men eating cats and dogs and their own children, waiting 
like vultures around the scaffold for the bodies of executed 

Men suffered this poverty because they did not know how to 
prevent or arrest the floods, how to irrigate their lands, or escape 
from sun-baked prairies to which they were chained by religion, 
how to prevent the plagues which wiped out in western Europe a 
third of the population at a stroke and, in cities like Vienna and 
Bologna, two thirds. This poverty was the fruit of ignorance. 

But there is another type of poverty that is chronic in societies 
and is more nearly related to wealth concentration, though it would 
be a great mistake to say that this is its chief cause. It inheres in 
all economic systems. In simpler economic groupings it arises out 
of men’s weakness, struggling alone against nature to win sub- 
sistence from the soil. The isolated feudal social islets depending on 
the limited resources of their small demesnes and their inability to 
exchange goods upon any considerable scale with others made the 
condition of almost all in the community one bordering closely upon 
poverty. In Japan we find feudal colonies starving next door to 
other colonies enjoying for the moment at least relative abundance. 
Seldom able to produce enough for the current year, they were 
without any reserves when drought or floods or insects interrupted 

It is found in the world today as in remote ages. Louis Adamic, 
describing a community in the Black Mountain, Montenegro, 
writes : 

Tsernagora is the same today as it was ... a hundred years ago. It is 
as poor as ever. Rocks, rocks, rocks. Sheep, goats, scrawny cattle snatch 
up every blade of grass as soon as it sticks its point above the stoney 
bleakness. On tiny patches, few larger than a city lot, and most consid- 
erably smaller . . . growing corn, tobacco, cabbage, and potatoes, subsist 
from one to ten families. But how can they? The cruel and simple answer 
is that their wants, restricted by centuries of lack and struggle, are 
extremely small. Thousands of families do not see the equivalent of five 
dollars throughout the year. . . . Thousands of persons, especially 



women, live on a meagre piece of crudely baked cornbread and a little 
sheep or goat cheese a day. Both men and women, if necessary, can go 
foodless from two days to a week without thinking they are starving. 

In the Dalmatian Highlands, Adamic found what he called a 
land of perennial economic crisis, sugar and salt undreamed-of 
luxuries, kindling wood at night their only source of light. Toward 
the end of winter, when food runs short, adults, particularly men, 
all but entirely refrain from food, strapping flat, specially shaped 
rocks close to the abdomen to keep the stomach from growling. 

The responsibility for this must rest in a variety of sources— the 
sterile soil, the strange earth tie that binds them to these unyielding 
hills, the venality and corruption at the center of government. But 
most of all, populations are impoverished by systems of land 
ownership that herd swarms of men upon patches of land while 
great tracts are reserved for the wealthy. 

The exactions of the landlord in countries like Japan — not to 
speak of the United States — keep the tenant farmer poor when 
he cannot possibly harvest a crop sufficient to keep himself and 
his landlord. The poor farmer, after paying his rent, has not enough 
left for subsistence. His lot is hopeless. But we will do well to 
remember that this is not the consequence of vast fortunes merely. 
Most of the landlords are small capitalists and many of them are 
hardly raised above the level of poverty. 

In the larger groupings in the populous cities where the more 
complicated money economy does its mysterious work upon so- 
ciety, there is an inherent flaw. It reveals itself in a process by 
which portions of the working population are rejected as unusable. 
We hear much of our early insurance against this defect. Unem- 
ployment was eradicated by draining off large numbers of families 
into what was called our “frontier.” It was so in Athens. Pericles 
found a frontier in the islands of the Aegean. Rome did the same, 
parceling out the lands of Italy until they were all gone and then 
dividing up the lands of conquered provinces. 

But in Rome, in Athens, as in the United States, as fast as the 
social organization was emptied of its excess working population, 



the system went promptly to work to produce a new surplus. To 
express it differently and more simply, that is the way capitalist 
money economy works. Imagine a population of a million workers. 
Aside from occasional spasms of boom, that society will discard 
a hundred thousand as useless. If the hundred thousand are moved 
utterly out of the society by immigration, the remaining nine hun- 
dred thousand will soon suffer another convulsion of rejection. 
Another hundred thousand or more will be found unusable. 
When they are removed by voluntary or forced exile, the purged 
society of eight hundred thousand workers will soon mark another 
ninety thousand or more for rejection. If the frontier is big enough 
and other forces do not intervene, it will drain away the whole 
population, after which it will, perhaps, feed them back to the old 
lands or to new ones if they can be found. The figures I have used 
are arbitrary and chosen merely to illustrate the point. 

This phenomenon finds its origin in the central flaw of the 
money economy — that up to now no one has discovered how, by 
healthy means, a sufficient money income can be distributed to all 
of the workers to enable them to purchase the product of the pro- 
ducing machine. 

The concentration of wealth has something to do with this state 
of affairs, though it is by no means the only cause. Nor are the 
great aggregations of capital the only concentrations which nourish 
this fatal defect. Small fortunes may well be as deleterious to the 
system as large ones. 

Nor are all large fortunes equally unhealthy. A fortune like John 
D. Rockefeller’s, acquired wholly in wealth-producing processes, 
is by no means as injurious as a fortune like Morgan’s, acquired 
almost wholly in parasitic functions. The Rockefellers, the Carne- 
gies, Armours, Fords, du Ponts are associated with the creation of 
wealth-producing machinery. One may very well argue that they 
have all drawn from the product more than either their ethical or 
economic share. But in the case of the finance fortunes, they have 
been acquired by pouncing upon wealth-creating machines already 
built and developed, capitalizing them for promotional and specu- 



lative purposes, reducing the ownership factor to liquid form, and 
running that liquid form through stock markets into the hands of 
investors as a means of withdrawing from those investors large 
gobs of their money savings. These parasitic promotional fortunes 
are, as a rule, almost wholly injurious and do, actually, play hob in 
the jamming of the economic system. 

Today, in highly organized modern capitalist money economies, 
the cyclical disaster takes the place of the hurricane, the earth- 
quake, the drought, and the plague. It produces those acute rashes 
of poverty that break out in our cities and farms when the economic 
machine breaks down. But the problem of chronic poverty re- 
mains; it hangs on in the midst of great booms. It is beyond a doubt 
associated with the problem of the distribution, not of wealth, but 
of income, in which problem the man of wealth is a serious factor. 





In the private museum of the Mitsui family in Tokyo there is 
preserved an ancient sign. It is the sign which hung over the first 
Yedo store of that Mitsui who founded the family commercial 
empire. It was hung out in 1673. It reads: cash payments and a 
single price. Two hundred and fifty years before Woolworth and, 
for that matter, a hundred years before that London Bridge draper 
for whom Robert Owen worked, there in ancient Tokyo was a 
cash-and-carry, one-price store in the bickering, bargaining Orient. 

This was the store of Hachirobei Mitsui. He began his career as 
a boy of fourteen in a little Tokyo shop. He ended as the leading 
merchant in the Japan of his day. He must have been a merchant of 
unusual talents. For in that distant day and in that uncommercial 
world, he is credited with having introduced a group of mercantile 
innovations that American business-office essayists are fond of ex- 
tolling as the peculiar fruit of the McKinley-Coolidge cycle. 

He opened branch stores, at least six of them, before he died. 
He established his own central warehouse. He inaugurated profit 
sharing among his higher employees. He housed his employees in 
large, airy dormitories, carefully supervised them, and introduced 
several hygienic regulations. He used double-entry bookkeeping. 
More surprising, he was a pioneer in advertising. On rainy days his 
spacious store in Suruga-cho, Tokyo, would lend to customers 
umbrellas flaunting on their roofs the name of Mitsui. He used 
billposters proclaiming the name of Mitsui in large block letters. 
He subsidized producers, playwrights, and actors to work the 




Mitsui name and store into the lines of the picaresque dramas so 
popular in that day, thus becoming a sponsor and by two hundred 
and fifty years anticipating the radio “commercial” of today. 

These striking similarities in the commercial devices of Japan 
and Europe — cut off from each other by Japan’s guarded isolation 
and the length of two continents — were not the only points of re- 
semblance. When Hachirobei Mitsui opened his first small store 
Japan had a feudal society. And the rise of that society, its evolving 
pattern, its disasters and disorders, and its changing forms paral- 
leled closely the origin, rise, development, and disintegration of 
feudalism in Germany and France. Thus men, pursued by the same 
fears and needs and crowded by the same pressures, hit upon the 
same escapes, yield to the same messiahs, embrace the same pana- 
ceas. The desperate Nipponese in flight from economic distress and 
bewilderment follows much the same economic road as the desper- 
ate Teuton or Briton — from despotism to feudalism, to guilds, to 
the money economy, to the dominion of the merchant, the entrance 
of money, the struggle between central power and feudal estate, 
until finally the two-sworded lord who had not a yen to his name 
had to fall back before the million-yenned merchant who had not 
a sword to his name, and needed none. 

The Mitsuis, according to the family’s own account, belonged 
to the “middle-class feudal gentry” and traced their ancestry to a 
statesman of the seventh century named Kamatari Fugiwara. One 
of his descendants settled in Omi province and took the name of 
Mitsui which means literally “three wells.” The name is associated 
with some dim legend of how that first ancestor found fortune in 
three wells upon his arrival in Japan — presumably from heaven. 
There, though noble, the family became a vassal of the powerful 
Sasaki clan. And around the middle of the fifteenth century a son 
of the Sasaki clan was adopted by the Mitsuis. Probably virility 
was running low and this youth, Takahisa Sasaki, was brought in 
for glandular reasons. He built a formidable castle on the shores 
of Lake Biwa in Namazue, became a leader of the Sasaki clan, 
and was known as the Lord of Echigo. 



This feudal society, like that of thirteenth-century Germany, 
let us say, was split up into a number of estates or baronies — little 
economic islets secluded from the rest of the world. Over these 
baronies presided a lord, who was called a daimio. He owned the 
barony and wielded the power of life and death over its people. 
Between these baronial islets little or no trade flowed. Instances 
are on record of men dying of hunger in one daimio’s demesne 
while in the neighboring estate the land overflowed with Japanese 

Over all was an emperor who was a deity and a name, but with 
no real power. The power was in the hands of a Shogun, but not in 
that absolute way in which the later Shoguns exercised it. It was 
quite futile against the local despotism of the daimio. And as re- 
gards central power, whatever central power the Shogun had was 
operated by first one and then another group of daimios who shoul- 
dered around that dignitary and dominated his functions. 

Some of these daimios were very wealthy. Mayeda, the Lord of 
Kaga, is reported to have had an income of a million koku of rice 
a year (a koku had the value of about a pound). Others — a large 
number — had incomes of 10,000 or more koku of rice. Many were 
just small plantation owners. The Mitsuis in Omi were daimios 
and, after their alliance with the Sasaki clan, wealthy. 

Then in the latter part of the sixteenth century there arose one 
of the great figures of Japanese history — Oda Nobunaga, a kind 
of Oriental combination of Louis XI and Garibaldi, an able warrior 
who set out to bring Japan under a strong central government. 
Nobunaga declared war upon the weak Ashikaga Shogunate. In 
his path to Kyoto lay the demesne of the Lord of Echigo — the 
Daimio Takayasu Mitsui (son of Takahisa). He was no match for 
the doughty Nobunaga who was bowling over the recalcitrant 
barons with regularity as he moved on Kyoto. He destroyed Mit- 
sui’s castle, drove him and his family from their demesne, and 
ultimately made himself the master of Japan. His work was com- 
pleted and consolidated by two other figures scarcely less important 
than himself — his successors, Hydeyoshi and Ieyasu. The latter 



installed himself as Shogun and became the founder of the Toku- 
gawa Shogunate, which ruled Japan for two hundred and fifty 
years during the long seclusion era that preceded the arrival of 
Admiral Perry. 

As for Takayasu Mitsui, the dispossessed Lord of Echigo, he 
fled with his family to Ise province, probably as insolvent as a 
Russian duke after Lenin. He was disgusted with arms and war. 
He resolved never again to use the two swords which were the 
mark of his rank. His son and successor, Sokubei Mitsui, was a 
peace-loving soul from whose spirit every last drop of romantic 
samurai nonsense about the heroism of arms had been drained. 
It was this Sokubei who decided to throw away his two swords 
and to enter the merchant class. 

The plunge from noble to trader was a steep one. In this land 
of caste, the court families occupied the top rank. Wasters and 
idlers, they lived in Kyoto, without estates or incomes, around the 
emperors, supported wholly by pensions from the state. Next in 
order were the daimios, or feudal barons. Then came the samurai, 
the gentlemen who monopolized the military functions of the so- 
ciety and supposed themselves alone to be fitted to fight battles, 
until the peasant armies of the emperor after his restoration chased 
the heaven-chartered warriors of the Satsuma clan into speedy 
submission. They lived upon the estates and served as the warrior 
knights of the daimios. And in the two hundred and fifty years of 
peace after Ieyasu, they were a wholly unprofitable charge upon 
the country. Below them were the farmers. The next layer were the 
artisans and below them the merchants, only a step above the 
handlers of dead bodies — the slaughterers, skinners, tanners, un- 
dertakers. It was down through this six-storied social structure 
that Sokubei plunged almost into the basement. “With remarkable 
fortitude,” says the Mitsui chronicle, “Sokubei abandoned his own 
class and enlisted on a commercial career as a brewer of sake.” 
Sokubei’s fortitude was doubtless reinforced by his appetite, like 
the aristocratic emigres of Russia who turned up as headwaiters 
and couturiers in New York and London. He had left only his two 



swords. The revenues of his rank were gone. Ieyasu Tokugawa 
had them. There wasn’t much else for Sokubei to do. 

He married Shuho, daughter of a tradesman. She is today more 
famed in the family annals than he. She was a sort of Japanese 
Hetty Green, a yen pincher and born bargainer. Sokubei became 
a brewer, which means he set up a little shop and made sake and 
shoyu from the soybean. The redoubtable Shuho opened a little 
bar with a pawnshop attached, an excellent combination, each 
department fattening upon the other. Sokubei died in 1633. But 
Shuho, his widow, survived him forty-seven years, ruled her small 
shop and her family with an iron hand, and died at the age of 

When Ieyasu Tokugawa became Shogun he established his cap- 
ital at Edo, a small, almost negligible village, later called Yedo 
and now the six-million-peopled metropolis of Tokyo. The new 
Shogun built an imposing, rambling, fortified castle expressing the 
might of his rule. The new capital quickly attracted numbers of 
people, and Ieyasu invited merchants to come to Yedo and make 
a market. Curiously it was the men of Ise province who went in 
numbers and almost usurped the trade of the new town. Among 
these was Saburozaemon, the oldest son of Sokubei. He opened a 
small drygoods store. When his youngest brother, Hachirobei, was 
fourteen, his mother sent him to Yedo to learn his trade in the shop 
of Saburozaemon. 

There Hachirobei remained fourteen years. When he was twenty- 
eight he retired to his native Matsuzaka and set up as a money- 
lender on his own account. Matsuzaka was a small town, and how 
much Hachirobei prospered is not reported. But he remained there 
until he was fifty-two years old. Then he moved to Kyoto, the home 
of the emperor, and established a drygoods store. This was in 1673. 
And there this Hachirobei laid the foundation of the Mitsui 
fortune. The Mitsui family in celebrating the three-hundredth 
anniversary of the formation of their commercial house chose 
Sokubei’s shop opening as the date. In a sense this was historically 
correct. But Sokubei was a mere village alky cooker and tavern- 



keeper. The brother Saburozaemon seems to vanish quickly from 
all the old chronicles. It is Hachirobei who is really credited by 
the Mitsuis as the founder of their commercial structure. 

After thirteen years of progress in Kyoto, Hachirobei opened a 
drygoods store in Yedo, which was now expanding as the new 
capital. There he put his famous sign — cash payments and a 
single price. The store grew; warehouse after warehouse was 
added until the store occupied a large space on both sides of the 
street Suruga-cho and employed many hundreds of clerks. It re- 
mained there, operated by the Mitsuis, until 1904. Then the Mitsui 
firm parted with it and it has since been owned by a separate 
corporation called Mitsukoshi, the largest department store east 
of Suez and in precisely the same spot in Suruga-cho as that first 
store. At first the store traded in silks and other textiles, the bro- 
cades of Nishyin being one of its specialties. But gradually other 
articles of merchandise were added. In 1 708 we find it establishing 
buying agents at Nagasaki to buy woolens, tortoise-shell ware, 
sugar, chemicals from Dutch ships. 

Man is a groping animal. He feels his way bungling, one step at 
a time. And it is an extraordinary observation upon his develop- 
ment in the commercial world that almost everywhere he has fol- 
lowed the same steps. The scenes, the costumes, the manners, the 
cast of characters differ in different countries. But men in the 
seventeenth century were turning with surprising inevitability to 
the same financial and commercial devices in Japan as their distant 
and unknown brethren in the Germany of Maximilian and the 
France of Francis I, getting into the same holes and out of them 
by the same devices and into still other, but similar holes. I have 
no doubt that, if one day we explore the moon and find it inhabited 
by men like ourselves, we shall find they have invented stores and 
money, bills of exchange, promissory notes, banks, double-entry 
bookkeeping, debasement of the coinage, national debts to keep 
the moon’s economy afloat, corporations and brokers and all the 
paraphernalia of the earth’s economic life. 

The unit of production was the estate of the daimio. He collected 



from his vassals and feudal tenants his share of the produce in 
rice. The rice was sent to Osaka to be exchanged for money or for 
other goods. The daimio consigned his rice to a broker — a kakeya 
— who offered it publicly and sold it to the highest bidder. In time 
these brokers formed an exchange. The buyer of rice was required 
to pay ten per cent down and the balance in ten days. The broker 
himself remitted the money to his client monthly. Thus he got the 
use of it for thirty days without interest and could do a kind of 
banking business. The buyer of the rice did not have to accept 
delivery immediately. Great warehouses were built and warehouse 
receipts were issued against the rice. After a while the buyer could 
pay his ten per cent down and borrow the balance from a broker or 
other moneylender, giving the warehouse receipt for security. And 
thus he could speculate in rice futures. A brisk trade sprang up 
on the exchange in these rice futures. And thus there developed in 
Japan a system of marketing rice like that in vogue in the cotton 
market in New Orleans and the wheat pit in Chicago. Indeed, in 
time the speculation became so wild, so violent, so upsetting to 
lenders, daimios, and buyers generally that a great scandal ensued. 
The government stepped in, instituted an investigation, prosecuted 
many brokers, executed several, reorganized the exchange, abol- 
ished margin trading, licensed brokers, and subjected the whole 
business to government supervision. 

Hachirobei Mitsui opened a bank in or next to his store in Yedo 
and there became a lender of money and, perhaps, accepted de- 
posits. The evidence on this latter point, however, is a little unsatis- 
factory. But he did become a kakeya, represented a number of 
daimios, indeed was the broker for several whole provinces. This 
business gave him an insight into the possibilities of profit in the 
handling of other people’s money. And sometime around 1690 he 
conceived an idea that men had already experimented with in 

The Shogun collected no taxes in money. All was paid in rice. 
Each district had a minor deputy known as a daikan who collected 
rice from the daimios. He shipped it to Osaka and sold it for gold 



or silver. The metal he sent to Yedo to the Shogun’s treasury. This 
was an expensive trip requiring many coolies, packing, and great 
danger of loss on the roads infested by brigands. Hachirobei had 
stores in Kyoto, Yedo, and Osaka. He went to the Shogun’s officials 
and proposed that he contract to deliver the gold or silver in Yedo 
within sixty days without cost. He planned to have the gold turned 
over to him by the governor of Osaka. He could then buy goods with 
it, ship the goods to Yedo in fifteen days, sell them for cash with- 
in the sixty days, and deliver to the treasury funds collected right 
in Yedo, thus doing away with the need for so much transportation 
of metal. The officials approved his plan and later extended the 
period for delivery to one hundred and fifty days. Hachirobei then 
had a continuous flow of Shogunate funds pouring into his posses- 
sion and open to his use for exploitation for five months. In other 
words, he got a five-month whack at the use of the government’s 
taxes before he was required to deliver them up in Yedo. 

This became the basis for the use of the bill of exchange in 
Japan, although singularly Hachirobei did not apparently take this 
next step. Other merchants saw that the same method could be 
applied to the transport of money for commercial as well as govern- 
ment purposes. There was a flow of payments from Osaka to the 
government at Yedo. But there was also a flow of payments from 
Yedo merchants to Osaka merchants. Brokers in Osaka found that 
they could collect money in Osaka and make delivery of metal to 
a creditor in Yedo without actually shipping silver save occasion- 
ally, by balancing credits in the two cities against each other. 


After the Tokugawa Shogunate got under way that powerful 
social chemical — money — began its slow work. Very little at a time, 
but very surely, the old feudal system began to lose its vitality, 
indeed to lose its way. Little by little the money system and all 
that went with it — the capitalist system — began to trickle over 
Japanese society. 



Gold and silver coins had begun to circulate around 1429 — in 
the Muromachi period. Goto Mitsutsugu began to buy placer gold 
and gold bars and to mint them into coins, Daikakuya minted silver 
into coins about the same time. Both grew rich. Some others fol- 
lowed suit. Also Chinese copper coins circulated freely. But when 
Oda Nobunaga rose to power he put an end to the nondescript and 
miscellaneous issuance and circulation of coins and conferred upon 
Mitsutsugu and Daikakuya the monopoly privilege of coining gold 
and silver respectively, so that these men became among the richest 
in Japan. As in Europe, men who had goods or services to sell pre- 
ferred to be paid in money. Money began to have an agio, or 
preference, over rice. By the middle of the Tokugawa Shogunate, 
a Japanese philosopher wrote: 

The possession of gold and silver means wealth. The foolish are held to 
be wise and the wicked good if only they are possessed of gold and silver. 
On the contrary one who has neither gold nor silver is held to be poor. 
However wise he may be he is dubbed a fool. A clever man with no money 
is regarded by the public as a dullard. And a good man so circumstanced 
is looked upon as a worthless person. As all things, life or death, success 
or failure, depend upon the possession of gold, all people irrespective of 
rank run after gold as the first requisite of existence. 

Japan was a country of about 26 million workers, a few hundred 
thousand samurai, and a handful of daimios. The daimio, to be 
sure, performed a function. He was the agrarian entrepreneur. He 
managed the economic producing unit — the estate or barony or 
plantation. The wretched farmers under the daimios were levied 
upon “so that they should neither die nor live.” 1 All above what 
was necessary to the most meager subsistence of the workers 
was taken by the daimio as his share. He used that to get the 
things he wished by barter and translated as much as possible 
into money. The Lord of Kaga had an income of over a million 
koku, which seems large. But he operated a barony with a popula- 
tion of 586,000 souls and he had to maintain not merely the eco- 
nomic machinery of this vast estate but supply all the functions 

1 Social and Economic History of Japan by Eijoro Honjo, p. 79. 



of a highly independent local government as well. There were 
about forty-five daimios with incomes of 100,000 koku or over and 
195 with incomes of 10,000 koku or more. There were many whose 
incomes were so small as to be unimportant. 

But the samurai rendered literally no service whatever. He was 
a professional warrior with no battles to fight during the long 
Shogunate peace. He assumed a heaven-sent charter as soldier. Yet 
in the many agrarian revolts during the Shogunate against indi- 
viduals and groups of daimios, the revolts were frequently success- 
ful. The divinely appointed warriors, encased in magnificent armor, 
fled swiftly to the castle and sent out envoys to negotiate peace. 
There were 350,000 of these parasites, each equipped with three 
hereditary servants who had also to be supported. They made up a 
swarm of over a million who toiled not, spun not, but lived upon 
hereditary, stipulated revenues paid them by the daimio out of the 
produce of the estate. As they were persons of exquisite fancy and 
cultivated appetites, they were among the first to discover the 
potency of coins to purchase the things they liked. And as gold, 
silver, and copper became more and more the coin of the growing 
cities and as daimios and samurai sought more and more to trans- 
late all their income into coin and as the merchants and bankers 
invented new ways to increase the amount of gold actually and 
potentially by increasing its velocity through credits and bills of 
exchange and clearances, money came more and more to dominate 
the daily operations of the walled-in island. 

Inevitably this began to increase the importance of the mer- 
chants who were gradually accumulating all the money, for the dai- 
mios got hold of it only to spend it again with the merchants 
and bankers. It began to trouble the daimios and samurai who 
became borrowers, who learned how to spend this year the income 
of next year and to add to the other burdens of administration the 
burden of interest. 

Some of these were thrifty gentlemen who knew how to adjust 
themselves to the new order of things. Thus it is recorded that the 
daimio Tsushima, who had a small barony with an income of only 



20,000 koku, bought Korean ginseng and other articles at low 
prices, sold them at a good profit, and was better off than a daimio 
with 200,000 koku. In short, the noble gentleman became in effect 
a merchant. The daimio of Matsumae with an income of only 7000 
koku sold the products of his own and another fief — Ezo — and 
lived equally to a daimio with an income of 50,000 koku, while 
another, Tsuwano, with 40,000 koku, turned manufacturer and 
made pasteboard, with a resulting income of 150,000 koku. 

But many of the daimios went from debt to debt, living in a 
state of continual emergency. Samurai were most severely hit. For 
they were continually borrowing from the town moneylenders, 
pledging as security their stipends from the daimios. Ultimately 
they became hopelessly and helplessly involved in debt and reduced 
to a state of grave poverty. Many of them drifted into the towns 
and turned to manual chores for a living, while others, putting the 
high ethics of the knight under foot, turned to such forms of graft 
as their special and various connections made possible. 

In this way the claims upon the income of the nation were being 
reshuffled. Before plowing and harvesting time came around, the 
daimio had a claim upon the product of the labor of every workman 
or feudal tenant who lived upon his land. The samurai had a claim 
upon a part of the daimio’s share. And the government had a claim 
upon both. But now the merchant moneylender — the lowly chonin 
— was establishing claims upon the income of the daimio and the 
samurai who owed them money. And slowly the money supplies 
of the country were being drained off into the hands of these traders 
and moneylenders through the processes of interest and profit. 
The samurai were being ruined, many of them declassed. The 
daimios — most of them — were being impoverished. The workers 
beneath them all were being driven to desperation by the taxes 
and other exactions wrung from the fruits of their labor. The 
merchants were becoming wealthy. The Mitsui family was ex- 
panding. It had six branch stores, the largest at Yedo, before 
Hachirobei died. It was in every form of moneylending and han- 



But there were others richer than Mitsui. In Yedo were the 
wealthy and ornate Messrs. Kinokuniya-Bunzaemon and Naraya- 
Mozaemon, fabulously rich by the standards of the times and ex- 
hibiting their wealth in the most ostentatious manner. At Kyoto 
was the nouveau riche Naniwaya-Juemon, who is said to have 
made the people gape at his splendid residences, his gardens, his 
dinners, his raiment. Richest of all was the leading rice broker, the 
great kakeya — the J. Pierpont Morgan of Japan — Yodoya Sabu- 
roemon, whose new palace and fresh magnificence seemed almost 
imperial. He put on such a show that the Shogun confiscated all 
his property. What was gathered in this seizure gives an idea of 
what the possessions of a wealthy Osakan or Yedoan consisted. 
The bailiffs seized fifty pairs of gold screens, three toy ships made 
of jewelry, 360 carpets, 10,500 kin of liquid gold, 273 large 
precious stones and countless small ones, two chests of gold, 3000 
large gold coins, 120,000 ryo of koban, 85,000 kwamme of silver, 
75,000 kwamme of copper money, 150 boats, 730 storehouses, 12 
storehouses of jewelry, 80 granaries, 80 storehouses of beans, 28 
houses in Osaka, 64 in other places, claim to the rice stipend of one 
daimio amounting to 332 koku, and 150 chobu of cypress forest. 

How large the houses, how roomy the storehouses, we do not 
know. But here was a considerable accumulation in a new regime 
and in a new economy. 

These Park Avenue Osaka and Kyoto and Yedo exhibitionists 
brought down upon their heads the wrath of the Shogun because 
he deemed them to be disturbing to society. Disturbing indeed! 
These upstarts, freshly risen from the dung heap, who were com- 
pelled to kneel in the street as their bankrupt debtors passed them; 
these despised traders, class neighbors of the animal skinner and 
the gravediggers, to be giving themselves the airs of court nobles! 
It would be difficult to keep the starving artisan and the slaving 
farmer feeling himself the superior of these men in brocades. It 
upset completely the class arrangement. Therefore they must be 
reduced to their proper level, at least in appearance. Hence they 
were forbidden to indulge in displays. Then to add a touch of logic 



to the rule, they must be stripped of some of their wealth at least, 
by taxes, by confiscations, by goyokin — forced loans upon mer- 
chants — by currency devaluations, since thus funds were provided 
for their impecunious superiors. The debts of samurai were can- 
celed at intervals. 

In addition to these reactions upon the trader groups from the 
woes of the bewildered agrarian nobles, the cities were developing 
their own troubles. The various producing groups, in this land of 
scarcity, feared they were the helpless victims of competition and 
overproduction. They sought monopolies. And the Shoguns, hard- 
pressed for cash, granted them for a consideration. Traders, 
brokers, merchants formed themselves into associations to monop- 
olize their trades. That is, guilds grew up in the towns. The 
fisherman coming home with his catch and the merchant to whom 
he sold it found themselves beset by all the real and imagined evils 
of competition. 

An apostle of self-rule in business named Sukegoro of Yamato 
appeared with his cure. He formed the fishmongers into a trade 
association. He set up a code of practice. He enrolled 391 whole- 
salers and 246 brokers in his corporative code authority. It was 
a scheme to protect the middleman. The fisherman bought his 
boat and supplies and got credit from the wholesaler or broker and 
in return gave him exclusive right to his catch. The association 
fixed the prices the fisherman received. The wholesaler sold only 
to the retailer. The consumer could not buy from the fisherman 
or the wholesaler. Sukegoro built preserves to keep the fish alive 
until the market was ready for them. He did under the authority 
of the government what fishermen have many times sought to do 
in New York under the sponsorship and enforcement machinery 
of gangsters and what all sorts of producers attempted under 
authority of the NR A; what the building trades do in defiance of 
law. The excess production was kept off the market. The price 
was kept up. The number of competitors was kept down. Other 
trades were similarly organized. There were jurisdictional disputes 
between craftsmen. The sawyers complained that the carpenters 



were sawing up too much of the lumber in buildings at the job 
site. The Shogun sought continuously, by subsidies, by warehous- 
ing the surplus, by price decrees, to keep up the price of rice to 
protect the daimio whose staple was rice. 

Apparently the Mitsuis steered as far as they were able out of 
these trade agreements. They seem to have contrived in every way 
open to them to evade these monopolistic arrangements, to buy in 
as large quantities as possible, and through efficient management 
to sell at lower prices in the interest of larger volume. Named as 
one of the ten bankmen to control the money market, they appear 
to have shied away from that combination. 

Above all, under the direction of Hachirobei, as their money- 
lending affairs grew, the Mitsui house refused to lend money to 
the nobles — to court nobles, daimios, or samurai. They sought in 
every way to keep their finances extricated from the shaky finances 
of the ruling class. Hachirobei lectured his sons about this cease- 
lessly. The house was rewarded with immunity, therefore, from the 
disasters that in all ages have descended sooner or later upon the 
banking houses that became the creditors of princes. They escaped 
the fate of the Bardi and the Peruzzi of Italy, and eventually the 
Fuggers in Germany, and of the Mendelssohns in our own time. 
Takafusa Mitsui, in a manuscript containing his recollection of 
the observations of his father Hachirobei, records this advice to 
merchants : 

Only a fool would believe that the feudal lords would permit the 
merchant to make unreasonable profit. These lords promise to send their 
rice to the merchant in Osaka, and on that security borrow money in 
advance. For the first year or two they appear to be willing to deposit 
more and more money with the merchants. Never will they pay back their 
debts by sending the promised amounts, but sending their rice to another 
quarter where they expect accommodation, they refuse the payment to 
the merchants from whom they already borrowed large sums. 

Through these stratagems and through the bankruptcy of the 
lords innumerable merchants were ruined. Takafusa records the 
names of forty-eight merchants in Yedo alone who were wiped out 



through their unfortunate loans to the nobles. Of all the many 
houses of that day the House of Mitsui and the House of Kenoike 
alone survive to the present. 

Hachirobei died in 1694. Before he died he had apparently 
meditated much upon the possible dissipation of his fortune. He 
had seen the solid substance of the great daimios melt away. He 
had seen rich merchants ruined. He saw the erosive power of suc- 
cessions to numerous heirs. In the Chonin Koku Roku, a manu- 
script privately circulated by his son, he is reported to have 
observed that “great fortunes will develop symptoms of decline 
when they reach the third generation.” It was natural that in his 
world, where the family played so important a part, he should seek 
to devise some means of preventing the dispersion of his fortune. 
He therefore contrived to organize his business in the form of a 
family corporation. He had six sons — one in charge of each of the 
six branches. He established six family groups and allotted to each 
a proportion of the inheritance. But the inheritance — that is the 
business itself and the fortune — were to remain intact. A son might 
manage in each branch, but all the branches belonged to the family. 
The profits belonged to the business, and the family was to deter- 
mine what each member of the family should receive as his share 
in any season. His will outlined a code of family ethics and a pro- 
cedure of management. After his death his oldest son, Takahisa 
Mitsui, who succeeded as head of the house, reduced his precepts 
to a code which still governs the family. It follows: 

1. The members of the House should deal with one another in close 
friendship and with kindness. Beware that contentions among the kin 
would in the end ruin the entire House. 

2. Do not needlessly increase the number of families of the House. 
Everything has its limits. Know that overexpansion, which you may 
covet, will beget confusion and trouble. 

3. Thrift enriches the House, while luxury ruins a man. Practice the 
former but avoid the latter. Thus lay a lasting foundation for the pros- 
perity and perpetuation of our House. 



4. In making marriages, incurring debts or underwriting others’ debts, 
act always according to the advice of the Council of the Family. 

5. Set aside a certain part of the annual income and divide it among 
the members of the House according to their portions. 

6. The lifework of a man lasts as long as he lives. Therefore, do not, 
without reason, seek the luxury and ease of retirement. 

7. Cause to be sent for auditing to the main office the financial reports 
from all branch houses ; organize your finance and prevent disintegration, 

8 . The essential of a business enterprise is to employ men of great 
abilities and take advantage of their special talents. Replace those who 
are aged and decrepit with young men of promise. 

9. Unless one concentrates, one fails. Our House has its own enter- 
prises which are ample to provide for any man’s life. Never touch another 

10. He who does not know, cannot lead. Make your sons begin with 
the mean tasks of the apprentice, and, when they have gradually learned 
the secrets of the business, let them take a post in the branch houses 
to practice their knowledge. 

11. Sound judgment is essential in all things, especially in business 
enterprises. Know that a small sacrifice today is preferable to a great loss 

12. The members of the House should practice mutual caution and 
counsel lest they blunder. If there be among you any evildoer, deal with 
him accordingly at the Council of the Family. 

13. You who have been bom in the land of gods, worship your gods, 
revere your Emperor, love your country and do your duty as subjects. 

Hachirobei saw that if successions could work dispersion and 
finally extinction of a fortune, holding intact the fortune through 
the years, accumulating its profits — plowing them back, in modern 
parlance — and uniting the combined wealth of an ever-growing 
number of heirs in a single continuing enterprise would progres- 
sively expand the fortune. This is what he attempted to do. Many 
great fortune builders have sought to do the same thing — the 
Medici, the Fuggers, the Rothschilds, and Cornelius Vanderbilt 
in our own time. But the Mitsuis succeeded where others failed. 



The family has continued to be merely stockholders in a vast 
central enterprise. The enterprise, with its own special identity 
apart from the family, has grown in wealth and power until today 
it is one of the most potent commercial instruments in the world. 

It was perhaps easier in Japan, with its strong national and 
religious emphasis upon the family and its long isolation in a feudal 
society, to keep alive this cohesive family enterprise. The family 
has been made, in accordance with the plan of old Hachirobei, a 
living, continuing, sacred institution. Each Mitsui, on coming of 
age, is required to take the following oath: 

In obedience to the precepts of our father and in order to strengthen 
the everlasting foundation of our House and to expand the enterprise 
bequeathed by our forefathers, I solemnly vow in the presence of the 
August Spirits of our ancestors, that as a member of the House of Mitsui, 
I will serve and follow the regulations handed down in the Constitution 
of our House, and that I will not wantonly seek to alter them. In witness 
whereof, I take the oath and affix my signature thereto in the presence 
of the August Spirits of our ancestors. 

Because of the laws in Japan, where it is apparently possible to 
entail a fortune, the family, organized and acting like a state 
through recognized and all-powerful representatives, can enforce 
this oath, since it controls the combined and concentrated wealth 
of the family and the income of each member. The youthful neo- 
phyte finds that he preserves his fealty to the family, to the august 
spirits of his ancestors and his dividend check, all in the same act 
of faith. 


In 1858, after Japan had abandoned her seclusion policy, the 
Emperor was restored to power over the Shogun, and the new era 
in Japan began. By this time the Mitsui family had become one 
of the three richest families in Japan. What this means we can only 
guess. There is a good deal of easy use of large figures in describing 
the wealth of old barons and the magnificence of princes, but it is 
difficult to avoid a pinch of salt as seasoning for these statistics. 



When one reads that upon his accession to power the Emperor sent 
for the three leading banker-merchants and borrowed 1000 ryo 
each from them — the ryo being similar to, if not the same as, the 
yen — we catch a glimpse of the very diminutive figures in which 
they spoke. 

For two hundred years, since that first little moneylending shop 
in Matsuzaka, the family had been, by persistent accretion and 
ruthless limitation upon withdrawals, creating a large bolus of 
wealth. It had, because of its inflexible policy, escaped the great 
losses that resulted from numerous debt repudiations by the 
barons. It must, of course, have suffered from the many ryo de- 
valuations. It must also have been subjected to many troubled 
nights and suffered losses through its association with the finances 
of the Shogun’s government. But apparently it found a means of 
steering amid the shoals and rocks of Shogunate finance. 

But in the end the Mitsuis became weary of the tottering Sho- 
gunate. The Shogun lost his power and the Emperor regained his 
because the old social fabric of the feudal era had drifted upon 
evil days. It was hopelessly entangled in debt. The government 
itself was trapped in endless financial difficulties. The clash of 
energies between the old feudalism of the barons and the new 
money economy of the merchants was tearing the economic system 
apart. The barons had grown tired of it because, for reasons they 
did not understand, the wealth of the nation was passing into the 
hands of the lords of Main Street. The merchants were sick of it 
because they were the ready-to-hand victims of the bewildered 
Shogun’s soak-the-rich policy. The government had to find funds 
to salvage failing daimios, to help the drifting samurai warriors, 
to appease the continually revolting farmers and the occasional 
town mobs. It taxed until the tax limit was reached; then it bor- 
rowed. Behold a treasury statement for the year 1830: 

Expenditures 1,453,209 ryo 

Revenues 925,099 ' 





One finds this budget balanced by an item called “special reve- 
nue,” which meant the profit on devaluing the currency. In the 
records of that Shogunate the deficit was increasing every year. 
Every year the budget was balanced by the device of devaluing 
the currency. In ten years the government created for itself 
7,558,000 ryo of “special revenue” by devaluing the currency. 
There should be nothing unfamiliar in this picture for the Ameri- 
can, Briton, Frenchman, German, or Italian of today. 

When, after Admiral Perry landed in Japan with his fleet of 
United States ships and opened Japan to the world, the mer- 
chants, barons, farmers who bore most of the burden of this dis- 
integrating regime, were happy to see it vanish. The Shogunate 
capitulated without a struggle and the Emperor went from Kyoto 
to Yedo, henceforth called Tokyo, to assume the government of 
the nation. When he went, Saburosuke Mitsui, then head of the 
family, went along with him as treasurer. 

The new era meant opportunity upon a vast scale for the Mitsuis 
and for those who had the means of perceiving precisely what it 
was all about. For now feudalism was to be replaced almost in 
a trice by capitalism. It was almost as if the curtain were rung 
down upon one act and lifted presently upon another. Japan was 
to leap forward over a gulf that it had taken France, Germany, 
and England three centuries to traverse. It was a dizzy plunge from 
the Holy Roman Empire of Maximilian to the Germany of Bis- 
marck in a few brief years. 

The age of long, slow accretions had ended as far as the Mitsuis 
were concerned. Now they were to see what could be done with 
coins when they were really put in motion. Japan, exposed to 
the new capitalist world, yielded to the infection as to some savage 
and swift organism. All of a sudden she needed everything, all 
the highly developed instrumentalities of the capitalist world — 
machinery, corporations, modern deposit banks, banks of issue, 
the refinements of credit. Above all she needed capital. The oppor- 
tunities were unlimited for those who were able to see. The Mitsuis 
sent a mission of five younger Mitsuis abroad to inspect this new 



world and its money-making inventions. They returned to Japan 
knowing what they should do among their twenty-six million 
countrymen who knew nothing of the wonders of the outer world. 

When the new Emperor Mutsuhito — to be known as Meiji — 
found himself in power, he found himself also without funds. 
He summoned Saburosuke Mitsui, Ono-Zensuke, and Shimada 
Hachirozaemon and made a modest touch of a thousand ryo each. 
Later he repeated this favor. But this was chicken feed, as he 
soon found. He sent for the three leading Main Street merchants 
and money men and told them to prepare a list of a hundred 
merchants. The Emperor summoned these gentlemen and told 
them plainly that he needed three million ryo. Mitsui, Ono, and 
Shimada were called on to underwrite the loan. The money was 
forthcoming. Capitalism was marching on. 

They were well rewarded. Mitsui, Ono, and Shimada were made 
exchequer agents of the crown. They collected all taxes and held 
possession of them for a while before remitting to the treasury. 
A Mitsui man was made director of the mint. Another was made 
head of the bureau of specie and currency and another governor 
of the bureau of commercial law. 

After a while it became apparent that what the new Japan 
needed was a modern bank. The Emperor’s finance minister, 
Inouye, whispered to the Mitsuis that they should organize one. 
It was then 1872. They sent their mission to America. After some 
difficulties and disappointments they opened for business their 
own bank, now known as the Mitsui Bank, Ltd. They had been a 
little embarrassed by a sort of enforced association with Ono 
and Shimada in another bank in the exchequer business. But a 
favorable circumstance in 1874 relieved them of that embarrass- 
ment. There was a brief recession in Japan. The three houses had 
been enjoying a boom. They collected the tax moneys of the 
Emperor. They held them on deposit. Rumors got around that 
these deposits were endangered. The finance minister called upon 
the three houses to produce the government funds. Ono and 
Shimada could not do it. Mitsui, by a tremendous effort, did. The 



other two houses were ruined, and the field was left clear to 
Mitsui. Then they launched their own bank and established thirty- 
one branches in Japan. Thus the Mitsuis extended thirty-one arms 
into all the corners of Japan and proceeded to draw in funds from 
every section. The bank grew swiftly. It had a capital of two 
million yen in 1876 and deposits of 11,369,000 yen. In 1932 it 
had a capital of 60 million yen and 687 million in deposits. It is 
and has been the core of the Mitsui development. Like those bank 
affiliates in America in the nineteen twenties, this reservoir of 
funds and creator of bank money drew into its treasury the 
savings of countless thousands that the Mitsuis could use to finance 
their numerous adventures. 

Then came that proliferation of enterprises that characterizes 
the family today. With unlimited money resources open to them 
through their bank and their possession of government funds they 
began slowly to reach out in every direction, to tap all the new 
sources of profit. Inouye, finance minister in Ito’s cabinet, left 
the ministry a rich man and set up a trading company called 
Senshu Kaisha to handle foreign trade. It prospered abundantly. 
The Mitsuis too, in 187s, organized a small company called 
Kokusan Kata (National Products Company). When Inouye went 
back to the cabinet in 1876 the Mitsuis took over his Senshu 
Kaisha, combined it with their Kokusan Kata, and organized a 
new concern called the Mitsui Bussan Kaisha. This became the 
holding company of numerous enterprises and is today the agency 
through which the Mitsui family carries on its great domestic 
and foreign commercial adventures. 

When the Meiji ministry got down to business after the restora- 
tion, it began to encourage and to organize modern industries. 
The government owned the Oji Paper Works. It built a model 
silk mill. It organized and developed the Shibaura Engineering 
Works. It built the Kanegafuchi cotton mills. It owned the Miike 
mines — the richest coal treasure in Japan. After a while the 
Mitsuis began as tenderly and quietly as possible to lift these off 
the government’s hands, buying out on the most favorable terms. 



Thus it went into silk manufacture, imported silkworms from 
Italy, taught the peasants more modern methods of silk culture, 
and ultimately made itself the largest factor in the world silk 
industry. They took over the Oji paper business in 1872. Today the 
Oji Manufacturing Company controls about sixteen corporations 
which own forests, sawmills, paper-manufacturing companies, 
power companies, railways, security companies, and a newspaper 
— the Mainichi — in Osaka. They took over the Kanegafuchi cotton 
mills. They still operate them and have spread out as the greatest 
textile producers in Japan. They tapped the China cotton market, 
buying cotton there and sending back cloth to compete with the 
English traders. They acquired the Shibaura Engineering Works 
from the government. Then they fixed their eyes on the Miike 

These mines, the greatest coal deposit in Japan, they got through 
some clever management in the ministry, for 4,550,000 yen. In 
the first year of operation they made back the whole purchase 
price. In half a century they realized a profit of 450 million yen. 
Thus money, cotton, silk, coal, and, little by little, other products 
fell into the skillfully exploitive hands of the Mitsui family. 


Persons outside Japan, when they hear the term “Mitsui fam- 
ily,” are apt to think of an extraordinary group of able and skillful 
Mitsuis managing the vast network of enterprises that make up 
their domain. It is more than doubtful if this extraordinary clan 
would today bulk so large in Japanese economic life if this were 
so. Even before the restoration, when Takahisa Mitsui was head 
of the business, the family had already learned to depend upon 
the administrative abilities of what the Japanese call bantos, or 
“head clerks.” And it was one of these — Minomura — who piloted 
the business through the troubles and shifting movements of the 
restoration period. 

Just when the family began using this method is not dear. But 



always the family council and the heads of the family branches 
were free to interfere and even to collaborate actively in manage- 
ment. However, around 1890, this numerous and wealthy family 
organization had to submit to one of those processes that in our 
corporate affairs we call “reorganization.” And a wholly new tech- 
nique of management suited to the new era was adopted. It came 
about thus: 

The Mitsuis collected government taxes. The taxes remained 
on deposit with them. This was a source of great profit. But 
Japan was growing up. In 1880 the government decided to collect 
its own taxes and to establish the Bank of Japan. This was a 
blow to the house. However, they still continued as local agents 
to transfer taxes from the provinces to Tokyo. But capitalism in 
Japan was developing all its familiar phenomena. Debt making 
had proceeded merrily. The farm debt had risen from an insig- 
nificant sum to 233 million yen. There were crop failures, un- 
favorable trade balances, losses on foreign exchange. There came, 
in short, a first-class capitalist depression. Then rumor began to 
whisper about the Mitsuis: their bank was in danger. There was 
a run on the Kyoto branch. It spread to Tokyo. The powerful 
Mitsuis, who had so many times found the government on its 
knees begging for loans, now had to appeal to the government 
for help. 

Inouye, powerful finance minister and Mitsui ally, later to be 
known as the Mitsui representative among the elder statesmen, 
agreed to save the house but demanded that it should submit to 
reorganization at his hands. It was in no position to resist. There- 
upon the imperial finance minister set about studying its affairs, 
its family code and laws, the constitution of similar European 
families. He decided that the Mitsui enterprises had to be pro- 
tected ruthlessly from the Mitsui family. 

He therefore drew up a new constitution. It organized the 
Mitsui business as a modern corporation, dominated, controlled, 
administered by executive heads wholly separated from the family 
council. It organized the family as a wholly separate entity. As 



a result, the business was put in the hands of a giant, over-all 
holding company — the Mitsui Gomei Kaisha — which holds directly 
or indirectly through subsidiaries all of the numerous enterprises 
of the concern. It is managed not by the family, but by directors 
who may include family members. But at the head of the Mitsui 
Gomei Kaisha is a managing director — a banto, or head clerk — 
who functions precisely like the chairman of the board of the 
United States Steel Corporation, as well as through various series 
of executives. 

The family, on the other hand, is merely the stockholder in this 
immense holding company. On its side it is organized, too. There 
is a family council. And when you hear of Baron Takakimi Mitsui 
as head of the family, it means head of this family council. He 
is, of course, nominal head of the business, too — the Mitsui Gomei 
Kaisha. But its actual head and manager is its reigning banto, 
its prime minister. 

The family is a carefully organized tribal unit. It is an economic 
clan existing as a sort of social bolus within the state and func- 
tioning under a written constitution. There are, in fact, eleven 
Mitsui families — six main families and five branch families, all ex- 
actly defined under the constitution. These constituent stems are 
immutable. This family and its domestic provinces are ruled by a 
family council organized as a sort of constitutional monarchy of 
which it is the house of peers. This council consists of the eleven 
heads of each family plus the retired heads, if any, and such heirs 
apparent of the existing heads as may have arrived at their ma- 
jority. But only the eleven heads have a vote. The president of 
this council, the tribal patriarch, with a veto on its judgments, 
is the head of the chief family. This council meets in secret once 
a month. It deals with family affairs — philanthropies, deaths, in- 
heritances, marriages, family debts, troubles, assignments of family 
members to business enterprises, and plans of all sorts. The council 
determines how much each of the eleven family households shall 
be permitted to spend. It may impose punishments and invoke 
sanctions for its decrees. Within the framework of the civil society 



this autonomous aristocracy assumes to regulate the conduct of 
its members. All families do not share equally in the dividends of 
the Mitsui enterprises. The head branch takes 23 per cent of the 
yield of profits of the Mitsui Gomei Kaisha. The five other main 
branches take a total of 57.5 per cent, the five branch families take 
among them 19.5 per cent. 

These bantos have been gentlemen of the most imposing im- 
portance in Japan, comparable to the board chairmen of such 
American institutions as General Motors or United States Steel. 
They have been, in fact, proportionately more important, because 
the House of Mitsui spreads over a far larger acreage of the eco- 
nomic life of Japan than any American or British corporation. The 
first of them, Rizaemon Minomura, piloted the family enterprises 
through the difficult, reformative days of the restoration and 
helped to shape the modern form and direction of the business. 
Unlike the Mitsuis themselves he began life as a candy maker 
and peddler who entered the service of Oguri, the last finance 
minister of the old Shogunate, became a banker with Oguri as 
his patron, and entered the Mitsui service to afford it the powerful 
friendship of the minister. He it was who saw the opportunities 
opening before the house in the new capitalist restoration period, 
saw that its beloved textile store at Suruga-cho was small potatoes 
in the new Japan, induced them to put it aside and turn to finance 
and promotion on the new model. 

He died in 1877, and there followed a more direct family man- 
agement that ended in the disaster of 1890 and the reorganization 
in 1900. By this time the Emperor’s finance minister, Kaoru 
Inouye, was the imperial patron of the Mitsuis and through his 
influence Hikojiro Nakamigawa became the banto . He was an 
intellectual, who began as a teacher at Keio University, wrote 
articles for magazines, served an apprenticeship in the foreign 
office, edited brilliantly the newspaper, Jiji Shimpo, became presi- 
dent of a railway, and then, at Inouye’s urging, went into the 
Mitsui bank, rose to its headship, becoming managing director 
of the Mitsui Gomei Kaisha. He played an important role in the 



reorganization of the existing industries and the acquiring of new 
ones. He drove the old Mitsui organization from the more leisurely 
ways of the old Japan to the faster tempo of the new. He was a 
bold, shouldering, self-reliant, and driving executive. He died in 
1901 to be succeeded by Takasi Masuda. 

Masuda had started life as a houseboy for Townsend Harris, 
first American minister to Japan. He then formed a connection 
with the powerful Inouye and became the head of his trading 
company. When the Mitsuis took it over and formed the Mitsui 
Bussan Kaisha, he became its first president and was largely 
responsible for the success of that institution which started with 
a loan of 50,000 yen from the Mitsui bank and in sixty years had 
an authorized capital of 100 million yen. He set the Mitsui foreign 
trading upon the course that has made it so powerful. He built up 
the cotton, silk, steel, and munitions business of the company. 

When he died he was succeeded by Takuma Dan, a graduate 
of the Massachusetts Institute of Technology, who became the 
head of the Miike coal mines before the Mitsuis bought them. 
He built those into the tremendously profitable industry they 
became. He directed the affairs of the company during the Great 
War and developed the vast munitions interests of the Mitsuis. He 
was assassinated in 1932 to be succeeded by the aristocratic Seihin 
Ikeda, Harvard ’95, a patrician who got a job with the Mitsuis 
in 1895 at thirty yen a month, became managing director of the 
Mitsui bank in 1909 and banto in 1933. He was finance minister 
in the cabinet of Prince Konoye, was for a while governor of the 
Bank of Japan, and was known as the Tiger of the Money Market. 
He retired from the headship of the Mitsui house, for the same 
reason that he retired from the finance ministry, because he was 
unpopular with the army. 

The business organization is for all the world like one of our 
great American corporate giants held in the hands of a central 
master holding company, save that its interests are far more 
diversified. At the top is the holding company — Mitsui Gomei 
Kaisha. This in turn owns a controlling interest in nineteen other 



corporations, most of them subholding companies. There are two 
others which handle the Mitsui philanthropies. 

Through this corporate pyramid the family carries on adven- 
tures in finance, trading (domestic and international), depart- 
ment stores, mining, engineering, cement, textiles, lumber, chem- 
icals, coal, oil, sugar, cereals, fertilizers, and so on. The whole 
imposing web is too complicated to describe. The Mitsui Gomei 
Kaisha is capitalized at 300,000,000 yen. 

The wealth of the family is indeed great — greater still meas- 
ured against the standards of Japan. Mr. Oland D. Russell, in 
The House of Mitsui, says that the present head of the House, 
Baron Takakimi Mitsui, when he came into the estate of his 
father, took over a taxable inheritance of 166,400,000 yen, or 
$55,000,000, but adds that Mr. Shumpei Kanda, writing in Shu- 
funotomo, estimated this private wealth at 450,000,000 yen, or 
about $130,000,000, and that archivists in the Mitsui library ad- 
mitted this was “probably pretty accurate.” The heads of the 
other ten families have fortunes as follows : 

Takahisa Mitsui 

170,000,000 yen 



Baron Takakiyo 




Baron Toshitaro 












Total including Baron Taka- 

kimi (450,000,000) 

1,635,000,000 yen 

This is the equivalent of $450,000,000. 

These great fortunes in large measure were the product, of 
course, of wise management, shrewd organization, and family 
policies to protect the growing mountain from erosion. But also 
they were not made without well-arranged, carefully nurtured, 



and well-oiled contacts with the proper government authorities. 
The restoration turned out to be a paradise for the rich merchants 
and the acquisitive patriots. Such statesmen as Inouye, Ito, 
Okuma made fortunes out of their ministries. Inouye, once Min- 
ister of Public Works, built many miles of railroad track. When 
he resigned, the cost of construction was cut in half. The great 
liberal Okuma was closely allied with the Mitsubishi. He was 
premier during the Satsuma rebellion in 1876 and financed it 
with paper money. It is said that when it was over he hauled sev- 
eral cartloads of scrip to his home. It was not difficult to do busi- 
ness with politicians like this. Almost every leading statesman 
was backed by some banker or promoter. The Mitsuis helped 
finance the Seiyukai or conservative party of Ito and Inouye; the 
Mitsubishis supported the Minseito or liberal party. Inouye, 
powerful finance minister, was intimately associated with the 
Mitsuis as a sort of superconsultant — guide, philosopher, and 
friend. After his retirement a Japanese yearbook referred to him 
frankly as the Mitsui representative among the Elder Statesmen. 

We need not rest this upon mere surmise. In June, 1910, Japan 
was about to contract for the building of the battleship Kongo. 
There was keen rivalry for the contract. The Mitsui Bussan 
Kaisha was agent for Vickers, the British armament firm. Takoto 
Sokai was agent for the Armstrongs. Both began to put pressure 
upon Admiral Matsumoto, Director of the Naval Stores Depart- 
ment. The Mitsui Bussan Kaisha engaged Matsuo Tsurutaro, a 
retired naval constructor-general, because of his intimacy with 
Matsumoto. He offered Matsumoto one third of Mitsui’s commis- 
sion from Vickers for the Admiral’s assistance. Matsuo told one 
of the Mitsui directors of the arrangement. He consulted with the 
other directors. The Mitsui Bussan Kaisha advised Vickers and 
asked that their commission be increased to accommodate Admiral 
Matsumoto’s demands. Vickers approved the deal and the com- 
mission was increased to 1,150,000 yen. Admiral Matsumoto was 
given 400,000 yen. And Mitsui-Vickers got the contract. The deal 
leaked out. 



Similar corrupt deals between the German Siemens-Schuckert 
Company and Japanese admirals exposed in the Reichstag by Dr. 
Karl Liebknecht, the socialist leader, excited the suspicion of 
Diet members in Japan. They did some probing and exposed the 
whole ugly Japanese bribery plot. Seven Mitsui directors of Mitsui 
Bussan Kaisha were indicted, along with their agent Matsuo 
Tsurutaro and Admiral Matsumoto. All were convicted and given 
two years in prison, Matsumoto getting three years and a fine 
of 400,000 yen. A little later the Mitsui family set up a fund of 
750,000 yen for the education and care of convicts. 

We have no need to pursue the fortunes of this extraordinary 
dynastic family further. The Great War, of course, added enor- 
mously to their wealth. The Mitsuis have placed all their influence 
and power behind the imperialist adventures of Japan in China. 
They are up to their necks in that episode — and there are men, 
sinister men in Japan, radicals who hate Mitsui support of the 
military, and, strange as it may seem, military men too, for differ- 
ent reasons, who look at them with a threatening glance. 

The Mitsui family possesses vast wealth. It controls 78 per cent 
of the paper industry in Japan, 17 per cent of all mining, 15 per 
cent of rayon, 1 7 per cent of cement, 1 1 per cent of coal and ship- 
ping, and an enormous amount of Japan’s foreign trade. Its flag, 
with the Mitsui crest — the Japanese figure three enclosed in a 
square — may be seen stenciled upon boxes and bales on the docks 
of the whole world. It has subsidiaries, affiliates, branches every- 
where. It operates in Germany as the Deutsche Bussan Aktien- 
gesellschaft, in France as the Societe Anonyme Frangaise Bussan, 
in South Africa as Mitsui Bussan. 

The five great family industries of Japan — Mitsui, Mitsubishi, 
Sumitomo, Yasuda, Okura — control, according to Mr. John Gun- 
ther, 62 per cent of the wealth of Japan, 70 per cent of its textiles, 
and 40 per cent of its bank deposits. This is not to say that these 
five groups stand united against Japan. On the contrary, there is 
keen and, in spots, bitter rivalry between them. The Mitsuis back 



the Seiyukai or conservative party while the Mitsubishi support 
the Minseito or liberal party. They are pre-eminent in different 
fields — Mitsui in foreign trade, textiles, paper; Mitsubishi in 
shipping and finance, insurance and trust companies; Sumitomo 
in engineering and the heavy industries; Yasuda in banking — 
owning the largest bank in Japan — and Okura, a newcomer, in 
trade and engineering. However, they are one at least in the sup- 
port of those fundamental principles upon which their vast interests 
are based. 

But all of them face trouble now. The foreign-newspaper 
reader sees Japan symbolized by a large-jawed, heavy-necked, 
cruel-looking little soldier with a bayonet. He is apt to think of 
all Japanese like that. But behind the Japan of the China adven- 
ture is a population of plain people deeply troubled and filled with 
all sorts of discordant elements. The Mitsuis have had one 
assassination — Takuma Dan, the great banto — in 1932. Today, 
strangely enough, the army, which it has so loyally supported, 
asks what service this immense family of traders is supplying in 
charging the government, which is the army, heavy prices for all 
that it supplies. Why could not the government take over these 
supply functions itself? The spirit of the military Fascist looks 
with unfriendly eyes upon its backers in Japan, as it has done in 
Germany. The Mitsuis speak softly in Tokyo. They spend mod- 
erately, fear to display their wealth. They have created a fund 
of 30 million yen for a foundation, not unlike the Rockefeller 
foundations, to purchase national good will. But the Mitsuis and 
all of the traders and bankers in Tokyo have been playing with 
fire. The flames leap about them and no one knows who or what 
they will consume. 

This family is unique in the annals of vast wealth gathering. 
The conditions of their country have made it possible for their 
founder to succeed in holding it together for so long a time. 
Money is the greatest of all money-makers. Old Hachirobei knew 
that. And he knew that if he could hold the central capital of the 



family together indefinitely its capacity to re-create and expand 
itself would grow progressively. He was able to create this com- 
mercial family dynasty because he wrought in Japan and because 
his descendants had the wisdom to submit to the creation of a 
monarchical structure with a monarch holding power in theory 
and a prime minister, chosen for his brains, exercising it in fact. 

Wide World Photos 

Cecil Rhodes 


Cecil Rhodes 



Cecil Rhodes, empire builder and diamond monopolist, dreamer 
and money-maker, who made a million dollars while taking his 
bachelor’s and master’s degrees at Oxford, is unique among the 
great fortune builders of history. 

Of him Spengler said: “He is the first man of the new age. He 
stands for the political style of a far-ranging, western, Teutonic 
and especially German future, and his phrase ‘expansion is every- 
thing’ is a Napoleonic reassertion of the indwelling tendency of 
every civilization that has fully ripened. . . . Rhodes is to be 
regarded as the first of a Western type of Caesar whose day is to 
come, though yet distant.” 

With some modifications, this is a just estimate. The Caesar 
ingredient in this powerful figure was large. He himself was 
pleased to be told that he looked like the Emperor Hadrian. He 
was an organizing and money-making genius of the first order 
with an overmastering hunger for that kind of power that can be 
had only with money. He conceived a design no less grandiose 
than the theft of a continent and, for a while at least, toyed with 
the idea of the theft of the whole world for the British crown. 
He amassed millions and spent them prodigally in pursuit of his 
passion of delivering the whole of Africa into the hands of the 
British Empire, as a prelude to making Britain mistress of the 

Today, on a lofty peak that he named “World’s View” in the 
Matopo Hills of Rhodesia, the immense colony he stole from 




Lobengula and the Matabele people, the body of this mystic Caesar 
rests under a granite slab, brooding over the rich empire he coveted 
and took. He had conceived the dream of an African empire while 
preparing for his degree at Oxford. Later in Cape Town, when 
England controlled merely the Cape Colony and Natal, the young 
diamond digger put his hand on a map of Africa near the Cape 
of Good Hope and, sweeping his broad palm upward to the Mediter- 
ranean, said: “All this to be red — that is my dream.” For this 
he plotted, intrigued, wrought throughout his life until he saw 
his own career close amid the flames of a cruel war that must for- 
ever remain a blot on England’s name, but that marked an inevi- 
table step in the march of the empire toward the goal of Rhodes. 

Cecil John Rhodes was born July 5, 1853. His forebears for 
several generations had been successful farmers. They had the 
money gift — that flair for getting along that flowered in the true 
British pattern when his grandfather was able to set up in the 
manner of a squire on an estate in Essex. This gentleman’s son, 
Francis William Rhodes, attended Harrow and Trinity College, 
took holy orders, became the vicar of Bishop Stortford in Hert- 
fordshire, married, and produced eleven children. Seven of these 
were sons. Cecil was the seventh child and the fifth son. 

The Reverend Francis Rhodes was not an impecunious parson. 
He enjoyed, in addition to the honorarium of his sacred office, a 
decent patrimony. Cecil was sent to the grammar school at Bishop 
Stortford, which his father refurbished with his own funds. There 
he remained until thirteen, when his father became his tutor. At 
sixteen he was ready for Oxford where he was registered. But his 
health was far from robust. What was probably tuberculosis in- 
duced the family physician to order a long sea voyage. Fate per- 
haps took a hand with the physician in this, for the voyage took 
young Rhodes to South Africa, where he was destined to remain 
throughout his life and play out a great role in the swelling drama 
of England’s imperial theme. 

Cecil’s oldest brother, Herbert, had settled some years before 
in Natal as a planter of cotton. Cecil made his home with Herbert. 



His health improved so rapidly in the healing air of Natal that 
he decided to remain indefinitely in South Africa. Very soon after, 
the two brothers went to the Komanzi Valley, south of Pieter- 
maritzburg, to try their hand at cotton raising. As things fell out, 
the chief labor of doing this rested with Cecil. Herbert left early 
in 1871 for the diamond fields. In spite of many hostile elements 
and general predictions of failure, Cecil produced two excellent 
cotton crops. And in after years, whenever admonished that he 
could not accomplish some difficult task, he was fond of saying: 
“Remember I made cotton grow in Komanzi.” 


When in 1870 Cecil Rhodes first set foot upon the soil of South 
Africa it had been but lightly touched by the European colony 
hunter. Think of a mere black-line outline of Africa. The holdings 
of European empires made but a few thin smudges at a few points 
along that outline. Great Britain held two small colonies at the 
very southern tip of the continent — the Cape and Natal. The 
Dutch farmers held the Transvaal and Orange Free State, inde- 
pendent republics, next to Cape Colony. North of them, through 
all the far reaches of mountain and jungle and desert, the land 
was inhabited by Negro, Semitic, and Arabian peoples in varying 
stages of savagery and civilization. 

The Dutch settled at the Cape in 1652 — a far outpost of the 
Dutch East India Company. The French seized the colony after 
conquering the Netherlands. The British took it from the French 
in 1795 and returned it to the Dutch farmers in 1803 under the 
Treaty of Amiens. But three years later a British squadron ap- 
peared off the coast, drove the Dutch away, and reseized the 
Cape. Eight years later the British paid the Dutch six million 
sterling for their loot. 

The Dutch farmers settled in Natal in 1828 and fourteen years 
later the English seized Natal. 

Six years later — in 1848 — the British forcibly took possession 



of another Dutch settlement, Orange Free State. This last outrage 
excited so much indignation in the Cape and Natal and the Trans- 
vaal that the English, to allay feeling, recognized the independence 
of the Transvaal and the Orange Free State. These Boer farmers 
had suffered cruelly at the hands of the English and hatred of 
Britain became almost a part of the religion of these stern African 
evangelical Dutch. 

Thus when Rhodes arrived in South Africa, the Transvaal and 
Orange Free State were independent republics, while the Cape 
and Natal were British colonies. Immediately north was a mag- 
nificent domain that had already begun to arouse the hunger of 
every sovereign in Europe. What riches slumbered in its moun- 
tains and jungles they could only surmise from an event that had 
just occurred near Natal, just a few hundred miles from the cotton 
plantation of Herbert Rhodes. 


One day in 1867 Farmer Chaik van Niekerk, visiting a friend 
in Orange Free State, observed his host’s son playing marbles with 
an unusually brilliant stone. Niekerk’s host presented him with 
the marble. The host, like Othello, was to learn he had thrown 
away a pearl richer than all his tribe, save that it was not a pearl. 
Van Niekerk showed it to a mineralogist at Cape Town who pro- 
nounced it a diamond. The Governor bought it for £500. What 
van Niekerk gave the boy who owned it is not recorded. 

Two years later a witch doctor brought to this lucky van Niekerk 
another brilliant. The farmer gave the man of magic five hundred 
sheep, ten oxen, and a horse — all he possessed — for the stone. In 
turn he sold it to a Hope Town dealer for £11,000, who sold it to 
Lord Dudley for £25,000. His lordship called the diamond the 
Star of South Africa. It weighed eighty-three carats. These two 
stones, one discovered by a child and the other by a witch doctor, 
changed the whole course of history in South Africa. 

The Star of South Africa spread its beam over the wide veldts 



and presently Dutch and English farmers and tradesmen swarmed 
along the Vaal River. Ten thousand diggers spread out along 
eighty miles of stream. They found diamonds — enough to keep 
alive interest in the new industry. Then, in 1870, diamonds were 
found in the yellow sands on the Dutoitspan farm — larger stones 
and in greater abundance. Some fifty-carat gems were found. The 
word “diamond” ran over South Africa, and even the world, as 
the words “oil” and “gold” had in California and Pennsylvania. 
The diggers poured in from all over the world by every ship. And 
it was in the midst of this excitement that a young student with a 
weak chest and seeking only health, with no suspicion of the 
acquisitive fire that burned in his bosom, set his foot upon the soil 
of South Africa. This young Cecil Rhodes was scarcely estab- 
lished on the new Komanzi farm to which he and his brother had 
moved before the restless Herbert left for Dutoitspan, leaving 
Cecil to tend the cotton. But, in 1871, Cecil, just eighteen, aban- 
doned the cotton farm and, with some digging tools, some Greek 
classics, and a Greek lexicon, set off in an ox cart to travel four 
hundred miles to join his brother in the diamond fields. 

There we may see the youthful prospector — half money-maker, 
half student — sitting, according to his own description, on an up- 
turned bucket, sorting gravel on a small table, fishing in the gravel 
for gems, and at other times deep in his textbooks. All about him, 
over a field five miles in radius, spread the new settlement. White 
tents were all mixed up with the lime heaps where 10,000 men, 
whites and blacks, labored like beavers in pursuit of diamonds. 
Herbert Rhodes did not remain long. He went off to hunt wild 
game. But Cecil did well. He wrote home in 1872 that he was 
making £100 a week. And after a little while he took a partner — 
C. D. Rudd — who was to remain with him through life — a young 
man like himself who had a bad chest, a feverish appetite for profit, 
and a great talent for administration. 

There were all manner of men on that dust heap. But these two 
boys were the most extraordinary of the lot. The prospector was 
limited to one claim. Soon one man was allowed ten claims. Rhodes 



bought up nine more. Later all limitation was abolished. Rhodes 
and Rudd went ahead getting possession of additional claims. 

By 1 8 73 the town of tents on the Dutoitspan farm had grown to 
a city named Kimberley that spread out over the Dutoitspan, Bult- 
fontein, and De Beers farms. Rhodes, though yet in his teens, was 
among its richest citizens. He had grown in health and in physique. 

He had never ceased to lament the loss of his course at Oxford. 
In 1872, for recreation, he made a trek by ox team through the 
wide veldt, among the mountains and streams of the Cape. He per- 
mitted himself the luxury of long hours lying on his back, camped 
at night looking up at the stars, drinking in the soft aseptic air of 
Africa and dreaming of the future — a time killer he indulged in 
all his life. He made up his mind to return to Oxford to take his 
degree. In 1873, leaving his partner Rudd to look after the busi- 
ness, he returned to England, and, having passed the entrance 
examinations, entered himself at Oriel College, Oxford. He studied 
at Oriel half the year and looked after his mining interests in Africa 
the other half, fleeing to the friendly airs of Kimberley in the 
English bad seasons. It took him eight years to finish the job at 
Oxford. But he left with his bachelor’s and master’s degrees taken 
together. He was twenty-eight years old. And he was worth a mil- 
lion dollars. 


Rhodes, with his sheepskins, went back to Kimberley in a 
moment of destiny. The prestige of England in South Africa was 
at its lowest. But during those years, while he studied at Oxford 
and wrought at Kimberley, great events were taking place in the 
world. England’s poets, professors, and preachers were inoculating 
her with the virus of world empire and Germany’s Junkers were 
taking her people along new flights of militaristic preparation. 
Writers, statesmen, warriors, and promoters were industriously 
sowing the seeds of the Great War and the Age of Hitler in the 
far future. 



So far as the masses of England and her public men were con- 
cerned, they had lost their appetite for imperialism. Gladstone was 
in power. When Disraeli conferred upon Victoria the title of 
Empress of India, Englishmen muttered, even protested, audibly. 
They did not want an empress. They had had too many and too 
bloody battles to put their sovereigns in their place. Having gone 
to long lengths to make the kingship less substantial they drew 
away from transforming their queen into an empress. Disraeli 
knew this and tried to put Victoria off. But she was eager for the 
title and never quite forgave her people for their resistance to her 
royal whim. It was necessary for Disraeli to assure the English 
that Victoria would be empress in India but only queen in England. 

As for Africa, the English were sick of the game there. As early 
as 1854 the government had set its face against further expansion 
in South Africa. English forces were in Egypt but the occupation 
was looked upon as temporary. Gladstone had said that the whole 
South African problem with its racial divisions superimposed on 
the grave native problems was practically insoluble. But events 
and certain drifts in the mind stream of Britons as well as all 
Europe were running in another direction. More than one apostle 
of empire was putting the heady draught to the lips of Englishmen. 
As the young prospector-student, Rhodes, took up his seat at Oriel, 
John Ruskin was preaching the doctrine of power and national 
vigor. “This,” he told Oxonians, and through them the youth of 
England, “is what England must do or perish. She must found 
colonies as fast and as far as she is able; seizing every rod of 
waste ground she can set her foot upon and then teaching these 
her colonies that their chief virtue is fidelity to their country and 
that their first aim is to advance the power of England by land 
and sea.” 

There was, of course, the dire implication of violence and war 
in these grandiose counsels. But war had its apologists. Carlyle had 
told his countrymen that “war was the supreme expression of the 
state as such.” It was neither antireligious nor antisocial but “an 
evidence of the life of the state concentrated on an ideal end,” that 



“manifestation of the world spirit,” as Professor Cramb later inter- 
preted the Scottish philosopher, “hazarding all upon the fortunes 
of the stricken field.” 

It was this same Dr. J. A. Cramb, of Queens College, London, 
who gave the most robust expression to this dream of “imperial 
Britain,” in frequent bursts of exhortatory rhetoric. “Imperialism 
is patriotism transfigured by a light from the aspirations of uni- 
versal humanity.” War, the handmaiden of imperialism, he glori- 
fied “as a phase of the life effort of the state towards complete self- 
realization; a phase of the eternal nisus, the perpetual omnipresent 
Strife of all beings toward self-fulfillment.” 

And while the warlike professor talked about England’s mission 
to “updo the world, to establish there her peace, governing all in 
justice,” as in Rome, nevertheless these academic Caesars had a 
supreme contempt for that peace that was to be the supreme 
flowering of their world conquest. “Universal peace,” said the 
predatory doctor, “in the light of history, is less a dream than a 

At the root of such a philosophy, of course, could be but one 
logical basis and that the glorification of the race. And so we find 
Dr. Cramb informing us that in “a race dowered with the genius 
for empire as Rome was, as Britain is, imperialism is the supreme, 
the crowning form which, in the process of evolution, it attains.” 
Exalted by his own rhetoric, the world-hungry doctor cried out: 
“If ever there came to any city, race or nation, clear through the 
twilight spaces across the abysses where the stars wander the call 
of Fate, it is now.” 

Dr. John A. Hobson, writing critically of his countrymen, said: 
“The Englishman believes he is a more excellent type than any 
other man; he believes he is better able to assimilate any virtues 
they may have; he believes his character gives him a right to rule 
which no other can possess.” 

One by one, under the exhortations of teachers, philosophers, 
poets, and statesmen, one leader after another and soon the people 
slowly succumbed to the intoxicating draught until, by the time 



Cecil Rhodes’ race was run, all England, from the romanticists 
who played with the knight-errant motif to the prospectors who 
hunted gold and diamonds, was aflame with the delirium. Before 
she was done with this arrogant pursuit of the visions of Ruskin 
and Cramb, she had seized dominion over four and a half million 
square miles and a hundred million people in Africa and another 
empire of 700,000 square miles and twenty million people in Asia 
and she had isolated herself from the affection and esteem of the 

It would be strange indeed if this evangel did not sink deeply 
into the soul of Rhodes. We find him saying in 1877, when he was 
twenty-four, after four years at Oxford: “We are the first race in 
the world and the more of the world we inhabit the better it is for 
the human race.” Here is that mortal doctrine that Roman, 
Spaniard, Frenchman, Briton, and now Fascist and Nazi in their 
turn have proclaimed upon the European continent and that has 
drenched that continent in blood. The cultural promoters of Hitler 
boast that the German Aryan is not only superior to the African 
and the Slav but to the Englishman, just as one of Cecil Rhodes’ 
most distinguished subalterns in the South Africa Company, Hubert 
Hervey, proclaimed through his literary ghost, Earl Grey, that 
“insofar as an Englishman differs from a Swede or a Belgian he 
believes he represents a more perfectly developed standard of 
general excellence. Yes — and even those nations like ourselves in 
mind and sentiment — German and Scandinavian — we regard as 
not so excellent as ourselves.” And it is not sufficient that they 
should nourish their pride with the contemplation of this excel- 
lence, but “it is essential that each claimant to the first place should 
put forward his whole energy to prove his right. This is the moral 
justification of international strife and war.” To strut and boast 
is not enough; they must “updo” the world. 

Just before Rhodes had first gone to Cape Colony, as we have 
seen, diamonds were discovered in the Orange Free State, a Boer 
republic. At a later day Lord Salisbury had said that Britain “had 
been called to exercise an influence upon the character and progress 



of the world such as has been exercised by no other empire” and 
this call had “come from what he preferred to call the acts of 
Providence.” The clarion call of the almighty God was trumpeted 
to what the Archbishop of Canterbury called Britain’s “Imperial 
Christianity” from the yellow clay of the Griqualand diamond 
mines. Those mines were found north of the Orange River and it 
was that river beyond which England said she would have no 
further “territorial ambitions,” using almost the same phrase 
Adolf Hitler used to Chamberlain at Munich. 

The new treasure was found in what was known as Griqualand. 
This territory had always been considered as part of the Orange 
Free State. President Brand of the Free State promptly undertook 
to police the mines. Presently Waterboer, the Griqua chief, set up 
a claim to the diamond fields. The British government compelled 
the parties to submit to arbitration. President Brand and Water- 
boer agreed on Lieutenant Governor Keate of Natal. Keate, a 
British civil servant, awarded the fields to Waterboer. And imme- 
diately thereafter Waterboer appealed to the British to take over 
his country, which the British obligingly did, diamonds and all, 
annexing it to the empire as a lieutenant governorship and later 
incorporating it in Cape Colony. The Boers saw in this a scheme of 
deep perfidy that they never forgot. Their suspicions were con- 
firmed when in 1876 Lord Carnarvon, Conservative Secretary for 
Foreign Affairs, tacitly admitted the wrong done the Free State 
when, as a solatium, he paid to it £96,000. 

This was in 1876. In the following year England, despite her 
recognition of the Transvaal Boer republic in 1854, violated this 
agreement and seized that small nation without warning. The pre- 
text was a Zulu uprising. The benevolent empire feared the Boers 
would not be able to cope with the warlike Zulus. Paul Kruger 
and General Joubert hurried to London to plead for their inde- 
pendence. They were told by a smiling Secretary of State that their 
people — the Dutch farmers — wanted the annexation. Kruger and 
Joubert hurried back to the Transvaal and readily produced a 



petition bearing the signatures of practically every voter in the 
Transvaal, protesting annexation. To mitigate the crime the British 
promised the Boers the fullest measure of local self-government. 
Instead the government set up was a military dictatorship. Glad- 
stone denounced the whole proceeding. “If Cyprus and the Trans- 
vaal,” he said, “were as valuable as they are valueless, I would 
repudiate them because they are obtained by means dishonorable 
to the character of the country.” But when the great liberal premier 
came into power in 1880 he refused to restore Boer independence. 
Gold had appeared in the Transvaal — not a great store but enough 
to give the land a pleasant smell. The voice of the Lord calling the 
great imperial Christian empire to service was rumbling in the 
bowels of the Rand. In the end the Boers, under Kruger and 
Joubert, revolted and in four pitched battles beat the British, the 
last at Majuba Hill where General Sir G. Colby, in command, was 
killed. Thus the pretense that England must grab the Transvaal to 
save it from the Zulus was utterly exposed by the swiftness and 
decisiveness of the defeat which the Boers administered to their 
“saviors.” Sir Garnet Wolseley warned that there was gold in the 
ground, that the time to finish the conquest was now. But Gladstone 
feared — with reason — that the revolt would spread to the Free 
State and the Cape Dutch and he again recognized the independ- 
ence of the Transvaal. 

This was in 1881. It was on the heels of Britain’s disastrous raid 
upon the Transvaal that Rhodes ended his studies in Oxford and 
returned to Kimberley, twenty-eight years old and one of the 
richest men in the Cape. 

He brought with him a compendium of ethical and political con- 
cepts which, if he did not invent, he assembled and edited and 
made into a philosophy of action. Rhodes was a thinking animal, 
but thinking was not a mere exercise in speculation. It was a prac- 
tical instrument set for practical ends. Thus at Oxford he had read 
a small volume by Winwood Reade that had profoundly shaken his 
belief in God. The speculations of the Darwinians had added to his 



heresy. He kept Reade’s book near him throughout his life and 
dipped into it again and again. But one of his biographers observes 
that Rhodes was not the sort of man to leave so important a ques- 
tion as the deity hanging in the air. He decided that it was a prob- 
lem beyond his own powers or leisure to settle, but that, as matters 
stood, it was a fifty-fifty proposition that there was a God. He had 
to adopt some theory as a working proposition. And so he took God 
on a fifty-fifty chance. 

It was part of his mental system that he had to have a basic 
charter of dogmas, if not intellectual principles, upon which to act. 
Many years later he told a gathering at Oxford that in his student 
years he came across Aristotle’s definition of ethics as “the highest 
activity of the soul living for the highest object in a perfect life.” 
And he chose there at Oxford that “highest object.” It did not 
matter that he had misunderstood Aristotle who had spoken of 
“the highest principle of right” rather than the “highest object in a 
perfect life.” The object he chose was the extension of the rule of 
the Anglo-Saxon race over the world. And this design he continued 
to follow through his life with a singleness of purpose and a disre- 
gard of the vulgar virtues in a manner to satisfy completely the 
specifications of Spengler, who adopted the dictum of Goethe that 
“the doer is always conscienceless.” 

In 1877, at the age of twenty-four, about the time that Disraeli 
seized the Transvaal, Rhodes, who saw in this a good beginning, 
made his first will. In it he planned a secret society, Jesuitical in 
its techniques, that would have as its mission the extension of 
British rule throughout the world; the occupation by Britain of 
the entire continent of Africa, the Holy Land, the valley of the 
Euphrates, Cyprus, Candia, all of South America, the islands of 
the Pacific, all of the Malay Archipelago, the seaboard of China 
and Japan, and the ultimate recovery of the United States of 

Here was indeed a plan to updo the world; a dream of imperial 
expansion beside which the fire of Hitler is a pale and ineffectual 
flicker. But Rhodes throughout his life never lost sight of this goal. 




Since Rhodes was an acquisitive dreamer, this is a proper point 
at which to clear up the details of his acquisitive program. 

That hive of tents and lime hills that peppered the veldt and that 
was Kimberley gradually turned to a town of streets and buildings. 
Money flowed into its roistering population. And there Rhodes 
spent his time between semesters at Oxford. 

The diamond industry, too, was taking form after the usual 
pattern of the pioneer mining rush. The promise of gold, diamonds, 
oil draws thousands of men with no other talent for growing rich 
save the urge of the wildcatter and the taste for wandering to far 
places. The diggers had but to lease claims and dig and if luck 
was with them the diamonds came quickly enough. But once the 
shovel had done its work a new talent was needed — the talent of 
the entrepreneur. From that point on the inevitable winnowing 
process began. When it became possible for one man to have as 
many claims as he could acquire Kimberley became the scene of 
the same comedy as the Pennsylvania oil regions. It became a 
battle for claims — for expansion — in which the weapons were 
money and business acumen. 

At first the diamonds were found in the shallow yellow clay. 
Later it was necessary to excavate the deeper blue clay. The 
treasure was richer but the cost was greater. At this point the im- 
practical, the extravagant, the impecunious diggers began to dis- 
appear. Men like Rhodes and his partner, Rudd, began to buy 
them out. Rhodes had an eye open for every source of profit. He 
and Rudd brought hydraulic pumping machinery from England 
to pump out flooded mines. They built an ice plant to supply the 
eager and profitable market on that blazing veldt. They made 
much money at both ventures. By the time Rhodes was done with 
his Oxford studies, he had almost complete mastery of one of the 
diamond fields. 

There were two such fields — the De Beers and the Kimberley. 



And just as Rhodes rose to the dominance of the De Beers digging, 
another equally colorful and extraordinary figure was widening 
his sway over the Kimberley mines. 

In 1873, about the time that Rhodes was beginning his career 
as a student at Oxford, a very different person, named Barney 
Isaacs, was making his way to Kimberley. Isaacs, the grandson of 
a rabbi and the son of a Whitechapel shopkeeper, was a product 
of the London ghetto. He had some superficial schooling in the 
Jewish Free School until fourteen. After that he and his older 
brother, Harry, with a flair for the theater and the music hall, tried 
their hand at clowning, juggling, and acrobatics in some cheap 
music halls. Stories of diamonds in South Africa and quick riches 
interrupted this career. Harry Isaacs went to the Cape in 1871 and 
Barney in 1873. They had adopted the name of Barnato in their 
clowning acts and took that name to South Africa with them. 
Barney took forty boxes of cigars which he peddled to the miners 
at fancy prices, but his whole capital was swiftly exhausted. He 
tried his hand at boxing and clowning in Payne’s circus. He worked 
in stores, began buying and selling any sort of merchandise, bar- 
tered old clothes and other trinkets with miners for the privilege 
of giving their dust a second sifting. When he had made enough 
money this way he appeared around the sorting tables of the mines 
with the little black satchel of a &o/>;e-walloper — the buyers who 
moved around daily buying for ready cash the gems of the less 
thrifty diggers. Before long he had acquired a claim and in time 
he had extended this to four. 

Unlike Rhodes, who was concerned with his education and 
played with grandiose visions of empire, Barnato devoted his 
energies with wholehearted singleness to making money and amus- 
ing himself. He diverted himself amidst the gay life of Kimberley 
and Cape Town, patronized the race tracks, frequented the bars, 
the restaurants, the gambling rooms, the theater, sponsored ama- 
teur performances of the drama and became himself one of the 
leading amateur actors. But all this merely gave him relaxation 
from the promotion of his fortune. He grew rich. He established a 



banking house in London — Barnato Brothers. He bought up Kim- 
berley claims until, like Rhodes on De Beers, he became the chief 
influence in the Kimberley field. 

By 1 88 1 these two men — Rhodes and Barnato — dominated the 
diamond industry of South Africa. The acquisitive talent, like that 
of the artist and musician, is precocious. Rockefeller was a pros- 
perous merchant at eighteen, Morgan was wealthy in his own 
right at twenty-one, Hetty Green could call off the stock quota- 
tions as a child, Fugger revealed his special genius in the twenties. 
Here, in South Africa, two precocious money getters were the lead- 
ing figures in that art — Rhodes at twenty-eight, Barnato at twenty- 
four. It was inevitable that they would wage war. Neither would 
be content in his own province. Rhodes, indeed, had returned from 
England not only with a dream of imperial aggression for Britain 
but with a dream and a plan for industrial aggression for himself. 

At twenty-eight Cecil Rhodes was thinking the same thoughts as 
the thirty-two-year-old Rockefeller twelve thousand miles away. 
Rhodes concluded that the rich rewards of the diamond industry 
could be drawn off only by a monopoly. Competition, production, 
prices must be controlled in the interest of “stabilization.” There 
are enough swains in the world to spend on their brides and wives 
and mistresses four million pounds for diamonds a year. No matter 
how many stones were offered, that, he had calculated, was the 
fund available to buy them. The course of wisdom was to offer 
the smallest number of stones, get the largest prices for them, make 
the largest profit, and conserve the supply. This could be done 
only by monopoly control. He therefore decided, in the intervals of 
meditation upon the ethics of imperialism, the functions of the 
deity, and the perusal of the classics at Oriel, that he would cap- 
ture the monopoly of South Africa’s diamonds. He would proceed 
quite as the elder monopolist, Rockefeller — of whom perhaps he 
had never heard — had proceeded, covering himself with riches 
and odium. 

He began his preparations before he was through with Oxford. 
In 1880 he formed the De Beers Mining Company, £200,000 capi- 



tal. He induced many diggers who would not sell outright to him to 
go in for shares in De Beers. Barnato did the same. He formed 
the Barnato Mining Company with £115,000 capital. Barnato 
was no slight adversary. He was richer personally than Rhodes. 
Through his London house he had access to large capital resources. 
He was shrewd, quick-witted, audacious, with unlimited confidence 
in himself. He loved to gamble and boasted that he had never had 
an unsuccessful operation. He was lively, buoyant in spirits, pugna- 
cious, and money hungry. 

But he had one weak spot in his armor. His company owned 
most of the Kimberley mine fields. However, an important section 
was still held by a French concern — the Compagnie Frangaise des 
Mines de Diamond du Cap — whereas Rhodes had all of the De 
Beers field. By 1885 Rhodes felt himself strong enough to begin 
his offensive against Barnato. And he began with the French com- 
pany. He arranged a loan with the Rothschilds in London for 
£750,000 and through a Hamburg syndicate issued £750,000 in 
shares. With these funds he made an offer to buy the French com- 
pany’s holdings for £1,400,000. This deal was on the point of going 
through — had indeed been approved — when Barnato, getting wind 
of it, made an offer of £300,000 more. Rhodes went to Barnato. He 
told him with convincing frankness that De Beers would raise his 
bid no matter how much he offered. Then he offered to sell the 
French company to Barnato for £1,400,000, precisely what he pro- 
posed to pay for it. This looked like complete capitulation. But 
Rhodes insisted that Barnato pay him for the French company 
with shares in the Kimberley company. Rhodes reasoned that even 
though he got possession of the French company’s shares, he would 
have to begin an aggressive fight to get into Kimberley. Further- 
more, he saw that if Barnato got the French company, the complete 
control would be in Kimberley and if, at the same time, he got a 
foothold in Kimberley he would be on his way to getting possession 
of that whole diamond field. Barnato, apparently, did not bother 
about this. The French company holdings would complete his 
possession of Kimberley and he did not believe that Rhodes could 



stretch his minority interest in Kimberley thus acquired to a con- 
trolling interest. He agreed. 

Immediately Rhodes set about grasping Kimberley company 
control. He began buying shares in Kimberley. Barnato, on his 
part, set out to cripple De Beers by a diamond price war. Also 
Barnato began to compete with Rhodes in buying Kimberley shares 
as they came on the market. Thus two wars — a diamond price war 
and a stock war — ensued. The price of diamonds went steadily 
down. Barnato thought he could either break De Beers or force it 
to surrender. But he was playing a desperate game against a master 

Once again Barnato played his hand wrong. He made the mis- 
take of underrating Rhodes’ financial resources. Rhodes had at his 
side one of the most remarkable financial figures of South African 
history — Alfred Beit, a Hamburg Jew who had started life as a 
diamond merchant in Amsterdam and graduated into banking, a 
shrewd, prudent, yet bold financier of great wealth, who had his 
own banking house and rich connections in Amsterdam and Ham- 
burg. He idolized Rhodes. 

Moreover, in the stock war, Rhodes’ buying was done by him- 
self, Beit, and his colleagues acting as a unit and aiming at control. 
When they bought Kimberley shares they kept them. Barnato, 
however, was supported in his buying by friends who were not so 
much interested in control as in speculation. They bought Kim- 
berley shares. But when the market rose swiftly, they sold to take 
the profit and, as they sold, Rhodes’ agents were on hand to buy. 
As the game got warm and Barnato perceived what was happening 
he appealed to his friends to buy and hold. But now his price-war 
stratagem smote him. He was asking men to hold on to shares from 
the sale of which they could make a rich profit — shares in a com- 
pany which, as the share prices rose, was losing money as the price 
of diamonds declined. He awoke finally to see that Rhodes had got 
a clear majority of Kimberley shares. There was nothing to do but 
sue for terms. 

Rhodes organized a new company — the De Beers Consolidated 



Mines, Ltd., which took over the holdings of both the old De Beers 
and the Kimberley company. Barnato became one of the board of 
life governors with control completely in Rhodes’ hands. Rhodes 
was to be general manager. The diamond industry was a complete 
monopoly under Rhodes’ thumb and he had traversed the first 
stage in his ambitious plan. But he had another at the same 

In the course of negotiations, Rhodes had made upon Barnato 
the extraordinary demand that the resources of the De Beers com- 
pany should be available for use in extending the dominions of 
Britain in South Africa. This ruffled the hackles of Barnato’s busi- 
ness sense. He wanted no mixture of politics with the business of 
making money from diamonds. But Rhodes was obdurate. For 
eighteen hours the two men argued the settlement with this strange 
item in it. Rhodes threatened, reasoned, cajoled. In the end Barnato 
capitulated. He said later he always avoided Rhodes when he dif- 
fered with him. “When you have been with him half an hour you 
not only agree with him but come to the belief that you have 
always held his opinion,” Barnato said. 

Nevertheless, it took eighteen hours of wrangling to bring 
Barnato around to Rhodes’ imperial ingredient in the diamond 
corporation. Rhodes had to flatter him. Barnato, rich though he 
was, had never been able to crack the crust of the social shell that 
excluded him from polite Cape society. He had never got his foot 
inside the Kimberley Club. Rhodes took him there to luncheon, 
promised him membership. The once humble Whitechapel jug- 
gler softened in that solvent atmosphere. When the deal was con- 
cluded Rhodes said to Barnato: “You have had your whim. Now 
for mine. I have always wanted to see a bucketful of diamonds.” 
Barnato produced them. Four hundred and thirty truckloads of 
blue clay in a year had to be washed to produce a bucket of dia- 
monds. Rhodes ran his fingers through the precious brilliants, 
letting them sift through his fingers. At thirty-six he had fought 
an epic battle against his thirty-two-year-old adversary for one of 
the greatest prizes in the world. He was master of the diamond 



world. The sparkling fruit of that tree dripped through his fingers 
now like sand. It must have seemed easy. Beyond lay still other 
and more difficult worlds to which he looked. He lost no time in 
making the start. 


Rhodes, the businessman, with his dream of British empire, 
was drawn inevitably into politics. Griqualand West, the diamond 
country, was incorporated into the Cape in 1881. And Rhodes 
was named one of its first members in the Cape House from 
Barkeley West. 

He was already a figure in the Cape. Millionaire, diamond dig- 
ger, Oxford man — in that small world with the population, as he 
described it, of a third-rate English city such a one was not to be 
discounted. Tall, broad-shouldered, auburn-haired, a “fine, ruddy 
Englishman of the country squire type,” as a contemporary de- 
scribed him, blunt of speech but friendly, giving himself no airs 
because of his success or education, he took his seat in 1881. Some 
older members made faces at his refusal to wear the conventional 
claw-hammer coat and high hat of the Cape statesman. “I am still 
in Oxford tweeds,” he said, “and I think I can legislate in them as 
well as in sable clothing.” He loved to mingle with politicians, men 
of affairs, and newsmen who gathered at the Civil Service Club and 
Poole’s for lunch and reveled in the talk. 

He took his seat as the Boer war fiasco approached its end in 
1881. Rhodes was hot with anger at Gladstone’s surrender. He 
opposed Boer independence. He would not be trampled upon by 
these Dutchmen. But the war was over; he was done with it. He 
spoke of it little. The man who had swept his hand over the map 
of Africa and said it must be all red now set about achieving that 

At the tip of Africa nestled the small Cape. Above it was Bechu- 
analand, a broad province of grass and desert. On one side of it — 
the west — lay German West Africa. On the other were the Orange 



Free State and Transvaal. It was a broad corridor, a “Suez Canal” 
as Rhodes said, leading northward from the Cape to the interior 
of Africa. If England did not seize that, her pathway north as 
Rhodes planned it would be closed. 

He proceeded at once to urge upon the Cape parliament the 
acquisition of Bechuanaland. There was no time to be lost, he said. 
Bismarck had only recently hoisted the German flag over German 
West Africa and was looking about for more. On the other side, 
the Transvaal Boers were ceaselessly seeking to push the dominion 
of their pastoral republic northward into the rich grazing lands of 
Bechuanaland. If the Boers took that country the Kaiser, Rhodes 
said, would find some pretext to attack and grab the Transvaal, 
thus commanding a stretch of territory running completely across 
South Africa above the Cape and locking Britain in. 

By 1883 Rhodes succeeded in having a commission named to 
investigate certain Griqualand claims. Named on this commis- 
sion, he expanded its functions to suit his ends. He went to Bechu- 
analand. He visited the native chief, Makorane, and induced him 
to appeal to the Cape to take over his land to protect him from 
other chiefs. The Boers had entered. Two small Boer republics 
were organized there — Stellaland and Land of Goshen. He induced 
the Stellaland president, van Niekerk, to accept a British protec- 
torate. He did not have the same success at Goshen where van 
Pettius, a stubborn and resolute Boer, held out. 

However, Rhodes, in February, 1884, induced Lord Derby to 
proclaim a protectorate over Bechuanaland. A commission was 
sent headed by a narrow and race-proud clergyman, John Mac- 
Kenzie, to organize the territory. He got into trouble with native 
chiefs and Boer leaders. He refused to recognize the pledges 
Rhodes had made to the Boers to respect their land titles and 
permit full measure of self-government. 

At this point, Paul Kruger, President of the Transvaal republic, 
acted. He proclaimed Land of Goshen Transvaal territory and 
sent in some Boer troops to make it good. 

Rhodes counseled swift action by the imperial government. An 



expeditionary force commanded by Sir Charles Warren with 4000 
men marched into Goshen on Christmas, 1884. Kruger saw he 
had gone too far. He asked for a conference. The conference was 
held at Fourteen Streams in the Cape. There the two men who 
would impersonate the hostile forces in the rising crisis of South 
Africa — Paul Kruger and Cecil Rhodes — met for the first time. 

Stephanus Johannes Paulus Kruger — later to be known as Oom 
Paul— President of the Transvaal, was then fifty-nine. Born in 
the Cape he had shared with his family and people the great 
northward trek out of the Cape beyond the Vaal River and the 
founding of the Transvaal republic. A magistrate at seventeen, 
military officer of his ward, he had engaged in the wars against the 
Matabeles, the Zulus, and the Basutos. He had risen through the 
grades of commandant general and vice-president to the presidency 
the preceding year. Patriarchal in appearance, iron-willed, nour- 
ishing a profound hatred of the British out of his memory of all 
the wrongs his people had suffered, deeply religious, preaching 
every Sunday in the church opposite the presidency the primitive 
evangelism of the Dopper branch of the Dutch Reformers, he 
looked upon himself as the chosen instrument of almighty God 
to lead his people. 

These two men — Kruger and Rhodes — were driven along by 
the same design of expansion. Kruger dreamed of an independent 
Boer republic from the Orange River to the Zambezi. Rhodes 
dreamed of an imperial dominion of the British empire in that 
same land. For the next fifteen years the plans of these two men 
in their respective directions would shape the development of 
South Africa and lead in the end to a bloody and disastrous war. 
It is possible that if diamonds had not been discovered in the Free 
State and gold later in the Transvaal, Kruger would have had his 
dream. In later years Rhodes spoke of him as “that extraordinary 
man” and “one of the most remarkable in South Africa.” But 
now as Kruger faced Rhodes for the first time at Fourteen Streams, 
the accumulating energies that flowed from the diamond mines, the 
still-small gold mines, and the growing half-braggart, half-com- 



mercial imperialism of Britain were too much for him. He agreed 
to withdraw from Land of Goshen. General Sir Charles Warren 
and his 4000 regulars assumed the rule of Bechuanaland, with 
Rhodes as a civil adviser. 

Warren, inflexible militarist imperialist, proceeded to act the 
role of Roman proconsul. He overran the country, quarreled with 
everyone, repudiated all of England’s pledges, and even arrested 
van Niekerk on a preposterous charge of murder. He finally 
quarreled with Rhodes, who wanted a moderate, ingratiating pol- 
icy with the Boer settlers, while Warren thought in terms of force, 
obedience, authority, hierarchy. He was the perfect fruit of that 
principle of racial coxcombery that lies at the root of imperialism. 
Rhodes quit his post in disgust, returned to Cape Town, resumed 
his seat, and denounced Warren’s methods. Warren had to be 
recalled. Bechuanaland was then erected into a protectorate. But 
Rhodes had completed the first step in that series of aggressions 
by which England would become the overlord of most of Africa. 


After the Bechuanaland affair the prestige of Rhodes stood 
high in the Cape. He had by his criticism of Warren conciliated 
the Dutch. And he had practically doubled the land area of British 
possessions in South Africa. His wealth had grown royal. His in- 
fluence in parliament was vast. His expansive dream of empire 
had become infectious. By 1889 he was acting treasurer general 
and in 1890 he was elevated to the premiership of Cape Colony. 

But before he became Prime Minister he set in motion that 
project which was to be his chef-d’oeuvre. The conquest of Bechu- 
analand was merely the prelude to his ultimate aim which was, 
as some began to phrase it, to make Africa “British from the Cape 
to Cairo.” His next step was to move northward yet again, this 
time into the vast country of Lobengula — a province twice as 
large as Texas, one day to be known as Rhodesia. 

In 1887 Rhodes heard that Boers were meditating a northward 



trek into Lobengula’s country — the land of the Matabeles and the 
Mashonas. Though Rhodes held no office he made the Boers under- 
stand that if they went into Matabeleland they must go as British 
subjects. “There will be no more Boer republics permitted in South 
Africa,” he said. Then he moved himself. And now we may see 
clearly the clever surgery of imperialism. 

He had a mission sent to Lobengula which negotiated a treaty 
with him. It was agreed (i) that peace should continue forever 
between the British and the Matabeles; (2) that Lobengula would 
refrain from entering into any agreement or correspondence with 
any foreign state to alienate any part of his country without pre- 
vious knowledge or sanction of the British High Commissioner of 
South Africa (February n, 1888). 

A second mission followed, managed by Rhodes’ partner, Rudd. 
Lobengula was a huge, intelligent, but not very warlike chieftain. 
He had developed a keen talent for negotiation with white men. 
Rudd and his two companions, representing Rhodes and not the 
government, remained nine months amid the strong odors of the 
Matabele chief’s kraal at Bulawayo fishing for an agreement. They 
wanted a concession. They sought an arrangement to permit them 
to hunt for and work metal mines in Matabeleland. Some gold had 
been found there by a German in 1864 and a promising gold belt 
by an Englishman in 1869, though little had been done about these 

Lobengula was wary of his visitors. He listened ceaselessly to 
the arguments of his suppliants. He wanted to be sure no infringe- 
ment of his sovereignty was intended. He wanted no white settlers. 
Rhodes’ agents told him: “All the white men want is for you to let 
them dig in the country of the Mashonas for gold.” 

Then one day Lobengula sent for the interpreter who accom- 
panied the Rhodes party. “You are sure you are not coming for 
grass and ground?” he asked. 

“King, no. It is minerals we want.” 

Thus assured, he put his mark to an agreement. This document 
gave Rhodes “complete and exclusive charge over all metals and 



minerals in my kingdom” and to “do all things that they may deem 
necessary to procure the same.” Rhodes agreed to pay Lobengula 
100 pounds a month, 1000 Martini-Henry breech-loading rifles, 
100,000 rounds of ammunition, and a steamboat with guns to 
patrol the Zambezi. 

Lobengula always insisted that he had been duped. He wrote 
a protest to the Queen later in which he declared: “Men asked 
for peace to dig gold and said they would give me certain things. 
A document was presented to me which they said contained my 
words. I signed. Three months later I was told that I had given 
away all minerals in my country.” 

The account of one member of Rhodes’ own mission serves to 
bear this out. But, even accepting the document on which Rhodes 
relied, all he had was an instrument giving him an exclusive con- 
cession to work mineral deposits in Matabeleland. Yet the next 
Lobengula knew of this transaction was when his warriors in- 
formed him that Rhodes’ agents had entered Mashonaland with a 
military force of 320 troops, escorting 180 settlers under command 
of Sir John Willoughby, armed with a charter from the British 
government that gave Rhodes the right to administer and govern 
the country, to set up courts and administer justice even among 
the natives. 

If Rhodes had proceeded with consideration for the natives in 
Bechuanaland, he unloaded those virtues now in Matabeleland. 
Had he merely invaded the country he might have appealed to 
the higher law of the superman and the superstate. But he first 
made a solemn agreement with Lobengula, obtained upon palpably 
false promises, and then violated the agreement the moment he 
had obtained it. 

As soon as he had his metal concession he hastened to London, 
where he induced the government to give him a charter for a cor- 
poration called the British South Africa Company, after the model 
of those old imperialistic trading companies under cover of which 
Dutch and French and English trader-adventurers had seized 
great portions of the world’s surface. It conferred powers of gov- 



ernment upon the British South Africa Company with a reservation 
that the British government might take over administration of the 
company on compensating Rhodes. These trading companies were 
the precursors, organizers, and missionaries of imperialism in the 
early capitalist era, often without any design on the part of the 
government. They spread their administrative authority over great 
areas as part of their commercial activities and gradually created 
colonial dominions that governments had to step in and administer. 
It was the Dutch East India Company that had first colonized 
South Africa, as the British East India Company had exploited 
India. And it was such a company that Rhodes now formed to seize 
and masticate Matabeleland as a prelude to its digestion by the 
crown. It had a special advantage for promoter and crown. Salis- 
bury was now Prime Minister. Rhodes’ dream of empire in Africa 
enjoyed high favor in London. The soil of South Africa was reveal- 
ing rich reasons for the spread of Christian civilization on that 
continent. Diamonds in Griqualand were succeeded by gold in Wit- 
watersrand. The good earth there looked good indeed to Downing 
Street. But the scramble for territory in Africa bristled with diffi- 
culties. The government could well leave the next stage of conquest 
to a trading corporation. It could disown the blunders of such a 
company. The company could withdraw from positions without 
compromising the prestige of the empress. As for Rhodes — to him 
the record of direct imperial government in Africa was a chronicle 
of blunders. He wanted no more Bechuanaland mistakes. If the 
penetration, confiscation, and organization of Matabeleland could 
be carried on by him, he could proceed without the hampering red 
tape of the Foreign Office. 

He pulled strings to get his charter. He lured several noble 
gentlemen into the enterprise. He made the Duke of Abercorn 
president and the Duke of Fife vice-president of the chartered 
company. He issued a million shares at a pound a piece. The pro- 
moters took 90,000 founders’ shares (founders’ shares which 
American promoters were to discover with delight twenty years 
later). And these took fifty per cent of the profits. The ordinary 



shares were sold to small investors. The meticulous old London 
Times plugged them valiantly. The country of Lobengula was 
“fabulously rich,” a veritable “Land of Ophir,” it repeated. The 
shares were eagerly snapped up. 

Having got his charter, Rhodes returned to South Africa and 
organized that expedition of settlers and soldiers that had alarmed 
the disillusioned Lobengula as it marched into Mashonaland in 
July, 1890. The chieftain demanded that the column come to Bula- 
wayo in order to reveal its intentions. It ignored this summons, 
pushed into Mashonaland, built Fort Salisbury, hoisted the British 
flag, and took possession of the country formally under the pro- 
tection of the British crown. 

By this time Rhodes had become Prime Minister of the Cape. 
Entrenched in political power there and in absolute power at the 
head of the chartered company, he was prepared to work his will 

But the enterprise did not prosper. In two years it was in trouble. 
Few settlers arrived. The company exacted fifty per cent of all 
minerals recovered. Food had to be brought through a difficult 
jungle. A police force of seven hundred was organized. The char- 
tered company paid out £250,000 a year and got little return. 
The settlers grumbled. Lobengula bided his time to smite the in- 
vaders. The white settlers stole the natives’ cattle, which was their 
chief wealth. Finally Lobengula sent an army to Mashonaland on 
pretext of chastising his serfs, the Mashonas. By this time Dr. 
Jameson was administrator of the chartered company. He opened 
fire on Lobengula’s warriors and the first Matabele war was on, 
Jameson with nine hundred men pursued Lobengula and in two 
pitched battles defeated him. The king abandoned Bulawayo, his 
capital. He was pursued but died of smallpox. The Matabeles sur> 
rendered. Rhodes won a costly victory, but in England the whole 
episode was roundly denounced as a recrudescence of medieval 

The trouble did not end here. Some years later, after the fa- 
mous Jameson Raid had impaired Rhodes’ power, there came a 



second Matabele war. The natives revolted again. A British force 
was sent under General Sir Frederick Carrington to subdue them, 
but without success. They were finally subdued by Rhodes him- 
self. And the manner in which he did it is the subject of one of 
those apocryphal fables that are built up around famous men — 
like the hatchet and Washington — which have more to do with 
forming popular judgment about them than the facts of history. 

The legend represents Rhodes in the heroic mold. Carrington, 
in winter quarters, planned a spring offensive to cost £20,000,000. 
This meant bankruptcy for the chartered company. Rhodes de- 
cided upon a daring strike. Taking five companions he went to the 
Matopo Hills. The chiefs agreed to see Rhodes. They assembled 
in a natural amphitheater walled by the granite hills. Rhodes went 
to them alone where he found the surrounding cliffs and rocks 
swarming with the warriors in war paint. They advanced, forming 
a menacing circle around him. He addressed them; admitted some 
grievances, and then, his eyes blazing, he denounced them for 
their cruelties. He ended by crying: “Is it to be war or peace?” 
Overcome by this display of courage one old chief threw down 
his weapons at Rhodes’ feet. “There is my rifle. There is my 
spear,” he cried. And the war was over. 

It is a pretty story, but untrue. Rhodes did go to the Matopo 
Hills. But Colonel Plumer was camped there with eight hundred 
men. He set up his own tent at a little distance, since he hated 
camps. He had several companions, among them a woman, Mrs. 
Colebrenner, and her husband. Instead of his going to the Matabele 
camp alone, one of the elder statesmen of the tribe, Babiaan, vis- 
ited Rhodes’ camp alone and remained as a guest for two weeks. 
He feasted on Rhodes’ hospitality, returned to the Matabele settle- 
ment, and persuaded the chiefs to visit Rhodes, which they did 
and agreed to end the war. They then arranged a great peace 
meeting to which Rhodes went and partook of the great feast 
spread for him. At two or three meetings Rhodes concluded a treaty 
with them ending a war that was costing the British South Africa 
Company £4000 a day. It was a triumph of skillful negotiation but 



in no sense the heroic adventure narrated by some biographers. 
The account given here is that written by Rhodes’ secretary who 
accompanied him on the trip. 

It ended with Rhodes adding another magnificent domain of 
over 400,000 square miles to the British land loot of South Africa 
— a territory more than four times the extent of the United King- 
dom itself. By 1890 this pragmatic dreamer of empire for Britain 
and riches for himself had, in nine years, acquired for himself 
undisputed control of the diamond monopoly of South Africa, a 
powerful claim upon the vast gold holdings of the Transvaal dis- 
covered in that time, and for Britain he had brought the territorial 
holdings up to nearly a million square miles, or one third the 
land surface of the United States. 


By this time Rhodes had matured his political philosophy about 
South Africa and the British Empire. He held steadfastly to the 
view that there must be a union of the white states — the Cape, 
Natal, Transvaal, and Orange Free State. The Dutch statesmen 
nursed the same ambition. But as the Transvaal and Free State 
were all Dutch and the Cape and Natal heavily populated with 
Dutch, their objective was a unified Dutch republic. And Dutoit, 
of the Afrikander Bund, insisted that “the one hindrance to this 
was the British flag.” 

Rhodes, however, did not want a union run from London. He 
believed, as he put it himself, in a “government of South Africa, 
by the people of South Africa, with the imperial flag for defense.” 

Rhodes had been dwelling much upon this theme since he wrote 
that first will some fifteen years before in which he had planned a 
great Jesuitical society to bring the world under the domination of 
the British Empire. The Matopo Hills, which he had conquered, 
had become a sort of wild natural cloister for him to which he went 
alone to wander and to meditate. And there, his friend W. T. 
Stead said, Rhodes spent long hours in solitude weaving the de- 



tails of his dream — working out his plans. He had begun to feel the 
urge of the Caesar in him. Stead speaks of the strange compound of 
hostile elements in this man, son of an old Roman emperor crossed 
with one of Oliver Cromwell’s Ironsides and educated by Ignatius 
Loyola. He was an agnostic, but he said to Stead: “If there is a 
God I think he would like me to paint as much of the map of South 
Africa red as possible.” Thus with a religious zeal he threw him- 
self into the grandiose plan of carrying out the hypothetical design 
of an imaginary god in whom he did not believe, save to give some 
sort of spiritual authenticity and sanctity to his personal ambition. 
And in pursuance of this scheme he played with three ideas. One 
was the immediate object of bringing Africa as swiftly as possible 
under British rule. The other was the reduction of the whole 
world — or as much as possible — to this rule and as part of this 
the recovery of the United States for the British crown. The third 
was the creation of an empire which would resemble the Holy 
Roman Empire, a federation of self-governing nations or dominions 
united under an emperor. The United States was to be one of 
these dominions. 

This recapture of America fascinated Rhodes’ mind. And he 
believed it wholly feasible. “Fancy,” he wrote to Stead, “the 
charm to young America, just coming on and dissatisfied, taking 
a share in a scheme to take the government of the world. Their 
President is dimly seeing it.” World mastery as the basis of stable 
rule seemed essential to him. “It would have been better for Europe 
if Napoleon had carried out his idea of universal monarchy.” 

So essential did he look upon the inclusion of the United States 
in this scheme of things that he told Stead that if the young repub- 
lic refused to come into the empire, England should apply for in- 
corporation in the union of states. And so bent was he on estab- 
lishing the principle of autonomous dominions within the empire 
that he contributed £10,000 to Charles Stuart Parnell’s movement 
for a separate Irish parliament. He made as a condition of the gift 
that the Home Rulers, while demanding self-government for Ire- 
land within Ireland, would also insist on representation in the 



British Parliament. This he felt would be a beginning. For he 
believed the ultimate form of government would include local 
parliaments in each free nation, including England, and an im- 
perial parliament that would control imperial affairs in which each 
dominion would be represented. 


In 1886 gold was found on a farm in the Witwatersrand in the 
Transvaal. Rhodes, Beit, and Rudd were among the first on the 
scene. They bought up farms. They struck rich veins. In a year 
they put their properties under the direction of a corporation 
formed by Rhodes called Gold Fields of South Africa. It be- 
gan with £125,000 capital. In five years the capital grew to 
£1,250,000. The corporation, reorganized as Gold Fields Consoli- 
dated, Ltd., in 1892 paid ten per cent dividend, fifteen per cent in 
1893 and fifty per cent in 1894. 

The irrepressible Barney Barnato also, somewhat tardily, spread 
his operations to the Rand. He became the largest single property 
owner there. And as the new city of gold, Johannesburg, rose amid 
the mines, Barnato became the same sort of colorful figure there he 
was in Kimberley and the Cape. 

By the middle ’nineties Rhodes’ interests were vast and consum- 
ing. He was at once Prime Minister of the Cape, head of the 
Chartered Company of Rhodesia — a sort of proconsular despot — 
managing director of De Beers Diamond Mines, and master of 
Gold Fields Consolidated. To all these operations he gave the 
most exacting attention. 

In addition to this he owned hundreds of thousands of shares 
in all sorts of enterprises. He looked upon himself, by reason of 
his position in government and business, as having a claim to a 
part in any enterprise in South Africa. There seemed no bounds 
to his acquisitiveness. He did not hesitate to express his disgust 
and annoyance at any promoter who floated an issue without cut- 
ting him in on the preferred list. In founding Gold Fields he, Beit, 



and Rudd had taken for themselves founders’ shares — a sort of 
superpreferential security that gave them a first claim upon a 
large section of the company’s profits before the ordinary shares. 
He was in continual quarrels with the shareholders about this. 
He bickered incessantly with the stockholders of De Beers and 
the Chartered Company about his share of profits. In the end he 
was forced to relinquish for ordinary shares his founders’ shares 
in Gold Fields. As for his numerous stock investments, his secre- 
tary Jourdan, a by no means idolatrous apologist, says he did not 
go in for market speculations to make quick profits on the changes 
in stock prices. But he certainly kept a running account with 
Wernher, Beit & Company and bought and sold upon a large scale. 
During these years his income was frequently as high as a million 
pounds a year. But he spent it lavishly. It is a singular fact that a 
man with such large revenues should be overdrawn at his bank 
most of the time. 

His mind dwelt incessantly on his vast schemes. He toyed with 
such projects as a railroad from the Cape to the Isthmus, with 
telegraph and telephone systems. His ceaseless pursuit of money 
was inextricably mixed up with his imperial ambitions for power 
for himself and for the empire. He was fond of attributing his 
acquisitiveness to his need for money for these designs. “No use,” 
he would say, “having big ideas unless you have the money to 
carry them through.” 

He worked like a man who felt the shortness of life and the 
length and immensity of his purposes. He was an inveterate letter 
writer. He would dictate often as many as fifty or more a day. 
At table with his guests he would keep his secretary near to dic- 
tate a letter or notes as his mind jumped to the idea. He would go 
sometimes at any hour of the night in his pajamas to his secretary’s 
room to dictate a telegram. 

Rhodes lived for many years in small bachelor chambers with 
his friend Dr. Leander Starr Jameson in Kimberley and at his 
club in Cape Town. But in time he built a magnificent estate called 
Groote Schur at the foot of Table Mountain outside of Cape 



Town. The house, a spacious castle, was in the Dutch style. The 
furnishings were the same. The rooms were filled with Dutch and 
Flemish antiques, tapestries, china, furniture. The walls were cov- 
ered with trophies of the chase, native spears, guns, shields — 
relics of the Matabele wars. He was fond of collecting old oaken 
chests. The grounds were extensively landscaped. There was a 
menagerie in them of well-known African animals. He himself 
gave much attention to a large collection of roses he collected. He 
spent little on art treasures. There were paintings, but only one 
of importance — a canvas by Sir Joshua Reynolds. 

Rhodes never married. At Groote Schur his sister, Edith Rhodes, 
ministered as his hostess. He was fond of guests. Groote Schur was 
a sort of open house where there were often throngs for dinner. 
Rhodes was a lusty Englishman who was fond of good food and 
drink and could account for large quantities of both. He took 
a mug of champagne and stout — what we now call black velvet — 
in the morning. At dinner he drank champagne. At night he per- 
mitted himself more potent libations. Some said he drank to ex- 
cess. He did indeed consume quantities of liquor that would have 
been excessive in other men. His capacity was large. But he did 
not get drunk. He danced little but occasionally took part in the 
lancers. He was a good billiard player and was fond of cards. His 
favorite diversion was reading. Rhodes was too much the man 
of affairs and his mind was too generally occupied with large 
projects to have the time for attention to books that he would have 
liked. He had a large library and he spent as much time as he 
could with the volumes he preferred. He retained his early inter- 
est in the Greek and Roman classics. Many of these he had spe- 
cially translated for him, carefully typed and handsomely bound. 
It was not surprising that he should be attracted by Gibbon and 
Carlyle, who supplied him with some choice philosophical supports 
for war and empire. He thought Rudyard Kipling the greatest 
living man. Indeed, he invited him to Groote Schur, built a bunga- 
low for him at the base of Table Mountain, where Kipling regu- 
larly spent a part of each year. 



Rhodes was a pleasant and thoughtful neighbor. But in the 
pursuit of his designs he was ruthless. He had an insatiable appetite 
for power, to which he brooked no challenge. There was a time 
when the imperialists in London began to fear that Rhodes was 
nourishing a plan to detach South Africa from the empire and 
make himself its master. It is hardly probable that he ever seri- 
ously toyed with the idea. He was known as the friend of the Dutch. 
He did indeed cultivate their good will and ultimately won it. 
But it was a part of his whole plan to unite South Africa, and the 
friendly support of the most numerous element there was essential 
to that design. He could be cruel to them as to the natives for whom, 
also, he sometimes stood up. He was one of those men who are 
more interested in omelets than in eggs. The omelet he was pre- 
paring was a great African empire. The eggs were nothing more 
than African Zulus and Kaffirs, Dutch burghers and English 
soldiers. He could not be too much concerned about cracking some 
of them. 

Rhodes was in no sense a religious man. He was a Darwinian. 
Science, he thought, had pulverized the Bible. He was an agnostic. 
William T. Stead insisted he had a broad strain of religious feeling. 
He certainly was not a Christian. And his acceptance of God was 
largely for political and working purposes. He did have in him, how- 
ever, an attraction for the external and dramatic elements of 
mysticism — some sort of spirit, some form of pagan divinity— 
which comprehended the glorification of power and the infusion of 
mystic forces into the trees, the rocks, the mountains. This perhaps 
is why Spengler classed him as a type of Teutonic Caesar. He loved 
to wander alone on the sides of Table Mountain or, better still, 
in the wide solitudes of the Matopos. There he could draw from 
the majestic bulk of its boulders and its peaks the spiritual sup- 
port of his dreams. He chose a spot amid the rugged rocks on a 
lofty height in these Matopos which he called World’s View. There 
he could see as in a vision the world he had set out to conquer in the 
name of his British blood. For above everything else he was a wor- 
shiper of race and the ruling urge of his life was that primitive 



and semibarbarous dream of blood dominion that moved the 
earliest kings and tribes upon the banks of the Nile, the Euphrates, 
and the Tiber. 


Was it in the wild loneliness of the Matopos that Rhodes came 
at last to that fatal decision that would unhorse him in South 
Africa, drive him from the premiership to disgrace, force him out 
of the directorate of the Chartered Company of his beloved 
Rhodesia, bring his chief lieutenant and friend, Dr. Jameson, to a 
London cell for fifteen months and himself to the very gates of 
that same jail? 

By 1895 his conquests seemed to have covered every immediate 
objective save one — the Dutch republic of the Transvaal. He was 
Prime Minister of Cape Colony. He dominated the diamond fields 
of the Cape and the gold mines of the Transvaal. He had added 
Bechuanaland and Matabeleland to the British Empire and pushed 
the Union Jack north as far as the Zambezi. The time had come to 
deal with his old enemy, Paul Kruger. And this he proceeded to do 
in the best traditions of empire building with the ancient weapons 
of conspiracy, theft, stealth, deceit, and violence. Not Clive hatch- 
ing the destruction of Suraj-ud-Dowlah in Bengal nor Warren 
Hastings ousting Chait Singh drew more heavily upon the re- 
sources of perfidy than Rhodes in the ill-starred Jameson Raid. 
Clive and Hastings at least could claim that their crimes had been 
sanctified by success. Rhodes committed the crowning crime of 
failure that darkened the hue of all the other deeds preceding the 

One of the most extraordinary characters in Cape history was 
Dr. Leander Starr Jameson. Born in Edinburgh, he studied medi- 
cine, but ill health forced him to the Cape to practice his profes- 
sion. He became Rhodes’ physician, friend, and fellow lodger and 
was induced later by Rhodes to give up his practice and take over 
the administration of the Chartered Company of Rhodesia. He 



commanded in the operations which destroyed Lobengula. He 
worshiped Rhodes and shared with him the passion for British 
world supremacy. In 1895 he was filling the post of head of the 
Chartered Company with much success. It was with Jameson that 
Rhodes entered upon the conspiracy to steal the Transvaal. 

Just as Griqualand West excited the appetite of the imperial 
government when diamonds were discovered, so the discovery of 
gold in the Rand signaled the doom of the Boer republic. Prospec- 
tors had swarmed into the Transvaal. These adventurers had estab- 
lished Johannesburg. It was not long before they outnumbered the 
Boer farmers, owned half the property and most of the wealth of 
the country. 

In time these newcomers — known as Uitlanders (Outlanders) — 
developed certain grievances against the Dutch republic. Some of 
them were not without foundation. They were heavily taxed. A 
tariff of thirty per cent was imposed on supplies, including food, 
coming in to them. Kruger established a government monopoly of 
dynamite, an essential commodity to the miners. He charged ex- 
orbitant prices. The miners said it imposed a tax of $3,000,000 a 
year in excess cost of blasting materials. It was the republic’s 
method of drawing from the wealth found in its hills a share for the 
people, and it did not take from them nearly as much as, a little 
later, England took by an income tax from her own citizens. De- 
spite these exactions the Uitlanders were practically excluded from 
citizenship by a provision that required fifteen years’ residence as 
a condition precedent. 

The other side of the story is that Kruger knew the English 
settlers in Johannesburg were not interested in citizenship in the 
Dutch republic merely to become part of it. He knew that across 
his boundary was a master organizer who was biding the day when 
he could swallow the Transvaal. He knew also that the English 
dwellers in the mine fields, many merely adventurers and camp 
followers, wanted citizenship in order to shape policy without any 
intention of transferring their allegiance and that to admit them 



would be, in the parlance of today, to admit a great Fifth Columnist 
and a prelude to the end of the republic. 

In any case Kruger claimed for his country nothing more than 
every nation asserts — the right to determine the conditions of citi- 
zenship. And many nations, including the United States, have 
exercised that right to exclude altogether not merely from citizen- 
ship but actual entry other nationals not wanted for one reason or 

The grievances of the Uitlanders were being industriously em- 
ployed by the imperialists to foment irritations that might become 
the prologue to a seizure of the Boer republic. 

A Reform Committee was organized in Johannesburg to demand 
a redress of grievances. Rhodes was invited to join. He named first 
his brother Ernest and later his brother Frank Rhodes to repre- 
sent him. While this committee was engaged in agitation to force 
concessions from Kruger, Rhodes saw in it the opportunity for an 
act of outright aggression against the Boers. He prepared his plans 
for seizure of the Transvaal for the British crown. In all that fol- 
lowed he kept far behind the scenes; so far, in fact, that few sus- 
pected that he had a hand in the tragedy. 

The plan proceeded as follows. The Uitlanders were to be 
whipped into a state of hysterical wrath over Kruger’s inevitable 
refusal of their demands. The citizens of Johannesburg would re- 
volt. The ensuing disorder would be used by Rhodes, as Prime 
Minister of the neighboring Cape, to send troops into the Transvaal 
to protect British subjects and to restore order. In the end the re- 
public would be extinguished and the Transvaal follow the fate 
of Griqualand, Bechuanaland, and Matabeleland. 

Preparations in Johannesburg for the internal uprising were 
entrusted to Colonel Frank Rhodes. Arrangements for the external 
military force to invade the republic were put in the hands of Dr. 
Leander Starr Jameson, then head of the Chartered Company in 

Sometime in November the Johannesburg Railroad was to be 
seized by the rebels. Jameson, camped near the border with troops, 



was, upon an appeal for help, to march into the Transvaal. Arms 
were sent from the Chartered Company offices in London both to 
Jameson and Colonel Frank Rhodes in Johannesburg. Drafts for 
the expenses were honored by that company and by Rhodes and 
Beit. Rhodes honored drafts for £60,000; Beit for £200,000. 

Jameson assembled a large force and stationed it within striking 
distance of the republic. He added 350 men to the Rhodesian police. 
A military force was also organized, made up of cavalry, engineers, 
and artillery commanded by Sir John Willoughby. The real pur- 
pose of this was concealed behind rumors given out that native 
uprisings were feared. The whole force was marched by Jameson 
outside of Rhodesia into Bechuanaland to a village — Pitsani — 
three and a half miles from the Transvaal border. So secretly was 
all this managed that Sir Hercules Robinson, British High Com- 
missioner, did not know of it. Rhodes’ own secretary suspected 

Rhodes made all this possible. To do so he had to abuse a series 
of trusts. As head of the Chartered Company he had to use its 
funds and staff for an act of war without knowledge of its directors. 
He mobilized the police of Rhodesia for an invasion of a neighbor- 
ing state. As Prime Minister he permitted the use of the territory 
of Bechuanaland by the Rhodesian troops to march on the Trans- 
vaal. And all this he had plotted in spite of the pledges of friend- 
ship and confidence with which he had won the support and good 
will of the Dutch citizens of the Cape, whose allegiance made it 
possible for him to be premier. He had, in fact, upon his own 
authority, without the knowledge of his parliament, the British 
High Commissioner, or the English government, prepared a war 
upon a friendly state. And to add to the perfidy of the plan a touch 
of Machiavellian ethics, Jameson was provided with a telegram 
written in advance of action, signed by five members of the Reform 
Association, which read: “Women and children at mercy of 
aroused Boers.” The date was left blank to be filled in. 

But when all was ready difficulties began to hamper the adven- 
ture. There being no open strong leadership, the conspirators in 



Johannesburg quarreled over details. Rhodes’ agents insisted that 
the rebels should hoist the Union Jack. Others insisted the Boer 
flag should be used. The Uitlanders could not agree. Rhodes’ whole 
design was not in all their minds. Thus the time wore on. Then 
December 2 7 was fixed for the uprising. When the time arrived it 
seemed impossible because the English were busy with the races 
and the Boers with nachtmaal, their Christmas communion. The 
blow was put off to January 6. 

But Jameson and Willoughby were growing restless at Pitsani. 
Jameson decided to wait no longer. He wired Rhodes for authority 
to move. “Unless I hear definitely to the contrary shall leave tomor- 
row and carry into effect my second telegram to you,” he said. 
Rhodes saw with terrifying clarity the difference between marching 
into Johannesburg to quell an uprising and going in without any 
provocation. He felt the revolt in Johannesburg had petered out 
“like a damp squib.” He tried to stop Jameson with two wires. 
Neither reached him. 

The impetuous doctor crossed the Transvaal border. He was met 
almost immediately by a force under Generals Piet Joubert and 
Louis Botha. By this time his rash act was known at the Cape. At 
Elan’s River an order reached him from Sir Hercules Robinson, 
High Commissioner, to turn back. He disobeyed. He attacked and 
a running battle was fought to within ten miles of Johannesburg. 
Next day a wire reached Jameson from Robinson proclaiming him 
an outlaw. Another dispatch told him the Reform Committee would 
send no help. The kopjes all around him bristled with Boer bayo- 
nets. He was trapped. He hoisted the white flag, surrendered to 
General P. A. Kronje, and was marched off to jail. 

Up to the very last minute Rhodes denied all knowledge of the 
adventure. The news of Jameson’s mad dash came to him as he sat 
at table with guests. He immediately left them. A Dutch leader, 
Schreiner, called next day and found him like a caged lion, his eyes 
fevered, dark circles framing them, his hair grayer. He knew all 
was up with him. Without further ado he resigned as premier. 

Jameson and his fellow officers were tried by a Boer court. 



Jameson, Lionel Phillips, Frank Rhodes, and the American John 
Hays Hammond were sentenced to death; others to prison or fines. 
Kruger commuted the death sentence, but forced the prisoners to 
pay £25,000 each in fines. Jameson and certain colleagues in the 
fiasco were taken to England and tried for violating the Enlistments 
Act. The doctor was sentenced to fifteen months in prison; others 
to lesser terms. Frank Rhodes was forced to resign his commission 
in the army. 

Rhodes paid all the expenses of the prisoners, including the 
£100,000 in fines assessed against Jameson, Rhodes, and others. 
He and Beit together assumed all the other expenses of that fatal 
expedition — thus relieving the Chartered Company. The whole 
amount exceeded a million dollars. 

Two parliamentary investigations of the raid were made — one 
by the Cape parliament in 1896 and the other by the British South 
Africa Committee of the British Commons in 1897. The Cape 
committee held Rhodes guiltless of giving the final order to Jameson 
to march, but also found that he had been concerned in the previous 
arrangements for the raid. When this investigation was made 
Rhodes was in the Matopo Hills settling the second Matabele war. 
His part in that event made a powerful appeal to the English in 
South Africa. That part was embroidered in the telling with several 
heroic details that did not conform to history but that made good 
publicity. This much overshadowed the findings of the Cape com- 
mittee as Rhodes prepared to go to London in 1897 t0 “face the 
music” before the House committee. As he made his way to Cape 
Town to sail he was met at every station by crowds which acclaimed 

Rhodes himself was troubled by one feature of the Raid. He 
realized that as Prime Minister he had been guilty of a breach of 
trust in plotting secretly an attack on a friendly neighbor. He said 
so privately. And in that kind of exultant repentance that welled up 
in his heart under the stimulus of the friendly demonstrations, he 
made up his mind to make his apology publicly in an address at 
Cape Town before sailing. He intended to say that he made a grave 



error in not resigning the premiership before he engaged in the 
arrangements for the Raid. But as he began, applause interrupted 
him and rose to a roar. He stopped midway in his purpose and 
never uttered that apology. 

In London he faced a committee with some notable enemies on 
it. They wanted to brand Rhodes but they were after bigger game, 
too. They wanted to show that Joseph Chamberlain had been in 
the conspiracy “up to his neck.” The committee never succeeded in 
doing that. In the end it censured Rhodes for being implicated in 
the arrangements but acquitted him of having given the signal to 
Jameson to make his dash. Generally the committee’s report was 
taken as a whitewash. And Chamberlain himself applied a second 
coat immedately afterward by saying that Rhodes had done noth- 
ing inconsistent with his personal honor. The most that can be said 
for Rhodes was that Jameson marched before he had given him 
the cue. It must, of course, be said for him that he himself assumed 
full responsibility for what happened and, to his latest breath, 
never blamed Jameson. 

Jameson’s health broke in prison. He had been released and 
moved to a nursing home when Rhodes got to London to testify. 
Later Rhodes induced him to return to South Africa. And it is a 
singular commentary upon the attitude of the Cape population 
toward the Raid that this man, who had committed so grievous a 
folly, was eight years after the date of that folly premier of Cape 

The judgment of the English public was merciful. Rhodes indeed 
had done nothing that most Englishmen would not have been 
happy to see a success. The interest of England in South Africa was 
high at the time. Gladstone had given way to Rosebery and then 
Salisbury. The imperialist philosophers and poets were singing 
lustily. And the cry of “Buy Kaffirs!” on the London Exchange 
was mingled with the jingles of Kipling and the clamor of God 
himself to England through his agents in the Church of England 
to press forward the cause of “imperialist Christianity.” The irre- 
pressible Barney Barnato was in London through 1895 launching 



stock issue after stock issue. His Consolidated Mines, Ltd., rose 
five hundred per cent in the City in a few months. The fever of 
speculation ran high. It blew up in September, a few months before 
the raid, and poor Barney lost three million pounds. But the market 
collapse did not extinguish the fires of empire. Incidentally, the 
disaster did not bankrupt Barnato by any means. But shortly after 
this his mind began to give way. He fell into fits of gloom. And while 
going with the South Africa contingent to the Queen’s jubilee, he 
leaped overboard and was drowned. 

Rhodes went back to South Africa. He gave most of his atten- 
tion to Rhodesia and in this period settled the second Matabele 
war already described. Lord Milner was made High Commissioner. 
Lawyer, politician, bureaucrat, he devoted himself assiduously to 
promoting the final crisis that ended in the Boer War. England was 
spiritually ready for the crime. In 1899 Rhodes, returning to South 
Africa from England, was received with acclaim everywhere. 
Crowds gathered at railroad stations to greet him. “The people of 
England,” he said, “have found out that trade follows the flag and 
they have all become expansionists. . . . Bygone ideas of nebulous 
republics are past.” 

Gladstone, shrewdly peering into the future at the inevitable 
consequences of England’s first steps in South Africa, had said in 
the ’seventies: “Our first site, acquired in Egypt, will be the almost 
certain egg of a North African empire that will grow and grow till 
we finally join hands across the equator with Natal and Cape 
Colony, to say nothing of the Transvaal and South Africa Free 
State in the South or Abyssinia in the North to be swallowed by 
way of viaticum on our journey.” 

Now in 1899 Rhodes said: “When I began this business of 
annexation both sides were timid. They would ask one to stop at 
Kimberley. Then they asked one to stop at Khama’s country. 
. . . Now they won’t stop anywhere. They have found out that the 
world is not quite big enough for British trade and the British flag.” 

He had stood for his old seat of Barkeley West in the elections 
of 1898 and been returned. He was in parliament when the pre- 



liminary scenes of the Boer War were being enacted. That dark 
chapter in British imperial history opened in October, 1899. Rhodes 
was right. Britain would not stop anywhere — not until she was 
stopped. The end of that disastrous victory was to give to Britain 
almost all of South Africa. 

Rhodes had no part in the active direction of the Boer War. It 
was Milner’s war, he felt. Moreover, early in the war he had gone 
to Kimberley and been trapped there in the siege. He bore his share 
in supporting the rigors and problems of that long ordeal. He raised 
and equipped at his expense the Kimberley Light Horse, three 
hundred strong. 

When the siege of Kimberley was ended, he went to London, 
made a visit to the Nile, and returned to London during the latter 
part of 1901, while the Boer War dragged on to its end. Here one 
last episode rose to plague him. For a number of years a lady 
charmer, the Princess Catherine Radziwill, had been a source of 
incessant irritation to him. She was an adventuress who edited a 
small journal in Cape Town. She thrust herself upon him, dined 
with him often, until she wore out her welcome as a visitor to 
Groote Schur. Finally she succeeded in creating the impression 
that Rhodes was a frequent clandestine visitor to her apartment 
and even that they were secretly engaged. There is literally no 
evidence to support either of these stories and very much to refute 
them. While Rhodes was in England he was informed that the 
Princess had been hawking about several promissory notes pur- 
porting to be given to her by him and amounting to around £2 0,000. 
Rhodes authorized his bankers to repudiate them. The Princess 
was arrested and Rhodes urged to return to the Cape to testify 
against her. 

He was a sick man. His heart was gravely impaired. He had been 
enjoying an occasional hunt and rides in Hyde Park. He went 
often to the offices of the Chartered Company, to whose directorate 
he had been restored. Dr. Jameson, who was with him, protested 
against his return to Cape Town because of his health. But Rhodes 
felt he should go. He feared what might be inferred from his 



absence at the trial. No one, he said, could predict what such a 
woman might say if he were not there to deny it. The trip to South 
Africa was a difficult one. He contracted a severe cold. A violent 
storm made the passage difficult. He was twice thrown from his 
berth. He arrived in a greatly weakened condition. But he testified 
against the Princess at the hearing before the committing magis- 
trate. She was bound over to the higher court where she was con- 
victed of forgery and sentenced to eighteen months in prison, nine 
of which she served. She was released because of ill health and 
lived to write a bitter memoir of Rhodes fifteen years later. 

However, before her final trial Rhodes was taken ill at Muizen- 
berg, near Cape Town. There he died on March 26, 1902. The 
Boer War, which was to seal the claim of England on South Africa, 
ended two months later — May 31, 1902. That end was in sight as 
Rhodes died. But his vision was on the later and wider details of 
his immense ambitions. As he died, according to his friend W. T. 
Stead, his last words were: “So much to do I So little done!” The 
final stages in his dream of a British imperial domain in Africa 
from the Cape to Cairo would not come until sixteen years later. 
The Boer War, fought frankly as an imperialist war, universally 
condemned in America, gave Britain a complete dominion in South 
Africa. The Great War, fought to make the world safe for democ- 
racy, gave her the balance. And this time America fought at her 

In his will Rhodes had written : 

I admire the grandeur and loneliness of the Matopos in Rhodesia. 
And therefore I desire to be buried in the Matopos on the hill which I 
used to visit and which I called the “View of the World,” in a square 
to be cut in the rock on the top of the hill covered with a plain brass 
plate with these words thereon — “Here lie the remains of Cecil John 

Like the imperial Jacob Fugger who built a royal tomb for him- 
self, Rhodes designed this mortuary chapel to acquire a grandeur 
from nature beyond the power of any architect and, unlike the 
boastful Fugger, he left an epitaph which derived its eloquence not 



from a collection of vain words, but from the panegyric implied in 
the noble surroundings and the implications in the masterful under- 
statement of the legend itself. This majestic spot Rhodes designed 
as the Westminster Abbey of South Africa. And there, as he 
planned, his body was placed as the first of its immortals. 

Rhodes did not propose that his lifelong effort to bring the 
English-speaking people together as closely as possible to advance 
the designs of a world-encircling British empire should die with his 
death. He left a will establishing the Rhodes Scholarships, which 
was the final form which that early dream of a world fellowship 
on the model of Loyola assumed. He bequeathed an estate valued 
at around thirty million pounds, which he made over to his trustees, 
to be used in perpetuity to support scholarships at his old alma 
mater, Oxford. Young men were to be chosen from all the British 
colonies and dominions, plus thirty-eight from our American states, 
who would spend three years in graduate work at Oxford. Students 
were to be chosen according to their abilities and with an eye open 
for young men interested in literary and public affairs — the sort 
who might reasonably be expected to become leaders, at least vocal 
leaders of thought. Exposed to the genial British atmosphere of 
Oxford for three years, while associating with their fellow Rhodes 
beneficiaries from every British state and colony, they might be 
expected to develop an empire consciousness. In time a great 
society of Rhodes scholars, with its members all over the world, in- 
cluding America, might well be counted on as a powerful nucleus 
of pro-British and empire feeling, particularly in moments of crisis. 
In the United States in 1938 there were 755 scholars, a number 
which now approaches 1000. One third of them were teachers, 155 
authors of books, 167 authors of articles and pamphlets, while 
many are college presidents and editors and preachers and radio 
announcers and commentators in this country. It is out of these in- 
heritors of the great imperialist tradition of the master that so 
many of those plans for the union of the American republic and 
the British empire are born. The spirit of the great imperialist 
planner is not dead. 


Basil Zaharoff 



If the Lord God Jehovah had not created Basil Zaharoff, some 
novelist sooner or later would certainly have got around to the job. 
Indeed, it is by no means certain that Zaharoff, as we have him, 
is not the joint product of God and the fiction writers. 

Lieutenant Colonel Walter Guinness, member for Bury St. 
Edmonds, committed the blunder against history of referring to 
Zaharoff in the House of Commons in 1921 as the “Mystery Man 
of Europe.” Having fixed upon him that fascinating label, the 
figure of Zaharoff became thereafter a costumer’s dummy upon 
which the news caricaturists of Europe draped whatever garments 
would vindicate his reputation. 

Mysterious indeed he is and still more mysterious he became 
at the hands of the sensational news portrait painters. The mys- 
tery begins with his birth. A French biographer, Roger Menevee, 
records that he was born in Moughliou, or Mugla, on the Ana- 
tolian coast. But a German, Robert Neumann, asserts that Zaha- 
roff, testifying in a London court as a young man, said he was 
born in the Tatavla or poor section of Constantinople, and he 
notes that the Mugla nativity is attested by an affidavit of a Greek 
priest made forty-two years after the event and was based upon 

It was never known with complete certainty to what country 
he owed allegiance. He was a Greek, born in Turkey, who lived 
in Paris. His right to the ribbon of the Grand Cross of the Legion 
of Honor was questioned in the Chamber of Deputies and M. 




Clemenceau had to assure the Chamber that “M. Zaharoff is a 
Frenchman.” But also he was throughout his life the guiding 
genius of a great British armament concern, acted as a British 
agent, was a Knight of the Bath, known in England as Sir 
Basil Zaharoff. 

Journalists said he spoke fluently fourteen languages — which 
is probably an extravagant exaggeration. They reported how he 
had confided to a written record the story of his life, filling fifty- 
eight volumes which he ordered to be burned at his death, while 
others told how he had himself destroyed the record, two days 
being consumed in reducing it to ashes in the furnace of his Paris 
home. Extravagant tales were told of his habits, his amours, his 
dinners, and the exotic dishes brought fresh by plane from im- 
mense distances for his table. But, in fact, the reporters and the 
historians have produced but little about the personal life and 
affairs of the man. Searching the extensive but empty records, one 
fails to discover any documents or letters or speeches or records or 
meetings or conferences or instances in which the man is actually 
present. Always one hears that he is somewhere in the background, 
off in the shadows, pulling the strings, supplying the stratagems 
and the money. 

Yet it is certain that he remains the most considerable figure 
in that feverish world of the munitions makers that has had so 
much advertisement since the Great War. Only a few names take 
first rank among this dubious company — old Alfred Krupp, the 
cannon king of Essen, the Schneiders of Creusot, Thomas Vickers, 
the English gun maker of Sheffield, Skoda, du Pont de Nemours, 
the American powder king, Colt and Winchester and Remington 
and Maxim. They were all, as Messrs. Englebrecht and Hanighen 
have called them, “Merchants of Death.” But the mightiest “mer- 
chant” among them, the man who played the largest role in the 
“merchandising” of munitions, the greatest market maker, was 
Basil Zaharoff. 

It was his melancholy good fortune to come upon the scene when 
the world went in for arms on an unprecedented scale and it was 



he who, more than any other man, developed the international 
market for arms. He did not invent it, to be sure. Old Alfred Krupp 
had played off Turkish orders against his native Prussia when 
Zaharoff was a mere fireman in Tatavla. And long before either of 
them — centuries before — old Andries Bicker, Burgomaster of 
Amsterdam, had built and supplied and provisioned and even 
financed a complete navy for Spain when the Spanish king was 
waging war upon Holland. He then explained to the outraged 
Dutch that if Holland had not armed the Spanish enemy, the 
Danes would have done it and reaped the profit. 

But Zaharoff played a leading, if not the leading, role in that 
strange world comedy of the arms makers leading the double life 
of chauvinists and internationalists. They gave us the spectacle 
of Boers mowing down English regiments with Vickers 7 pom-poms, 
Prussian surgeons picking out of Prussian wounded Austrian 
shrapnel fired by Krupp’s cannon, French poilus massacred by 
shot poured out of guns made in Le Creusot, English Tommies 
killed by weapons produced by Armstrong and Vickers, and 
American ships sent to the bottom by U-boats built on models 
supplied by American submarine builders. Zaharoff was the master 
of what one biographer has called the “principle of incitement , 77 
under which war scares were managed, enemies created for nations, 
airplanes sold to one nation and antiaircraft guns to her neighbors, 
submarines to one and destroyers to another. He did what the 
cigarette people did, what the liquor industry, the beauty industry 
did — created a demand for his merchandise. The armament indus- 
try became a game of international politics, the arms salesman a 
diplomatic provocateur, the munitions magnates of all nations 
partners in cartels, combines, consolidations; exchanging plans, 
secrets, patents. He was the greatest of all the salesmen of death, 
and, as one commentator has observed, if you would see his monu- 
ment, look about you at the military graveyards of Europe. 




Zacharias Basileios Zacharias — later to be known as Basil 
Zaharoff — was born October 6, 1849, apparently in Mugla, near 
the Turkish capital of Angora. His people were Greeks who had 
lived in Constantinople, fled to Odessa during the Turkish per- 
secutions in 1821, returned to Mugla, and then, when Basileios 
was three years old, took up their home again in the Tatavla or 
poor district of Constantinople. The boy went to school until he 
was sixteen, when some disaster to his father forced him to go to 
work. He worked, we are told, as a fireman, a guide, a money- 
changer. There is more than a hint that these early years were 
passed amid rough surroundings and that this impulsive and some- 
what lawless boy — like one of our prominent labor racketeers, 
to use his own explanation of his twisted ethics — suffered from 
lack of “bringing-up.” 

When he was twenty-one he found work with an uncle in Con- 
stantinople who had some sort of mercantile business. One day 
Basileios disappeared, taking with him money from the cash 
drawer. The infuriated uncle traced him to London where he was 
arrested. How or why he was arrested in London for a crime 
committed in Turkey is not made clear. It was perhaps a stage 
in the process of extradition. In any event Zaharoff pleaded that 
he was a partner, not an employee, of his uncle, producing a paper 
attesting that fact — a paper he had miraculously discovered in his 
trouser pocket on his way to the courthouse — and was let off. This 
episode is by no means clear. But what there is of it reveals the 
more or less dark cloud in which he began his career. 

As in all things relating to Zaharoff, there are other versions of 
this flight. Robert Neumann, who spent some time investigating 
the story, but unfortunately envelopes all that he writes in a 
cloud of luminous smoky words, insists that it was not money, 
but goods that Zaharoff stole and not from an uncle but from a 
Mr. Hiphentides; and, having converted the merchandise into 



money, fled to London where he was arrested on the complaint 
of Mr. Hiphentides, after which he was not acquitted but let off 
with a reprimand on his promise to make amends. 

Zaharoff, after this narrow escape, went to Greece, Turkey 
being “no thoroughfare” to him. In Athens he made his Basileios 
Zacharias into Basil Zaharoff. He remained in Athens from 1873 
to 1877, living by odd jobs of all sorts. Somehow stories of Zaha~ 
rofffs unsavory past leaked out in Athens. The atmosphere chilled 
for him among the youthful compatriots with whom he fraternized. 
Apparently Athens became too unpleasant, and the harassed youth 
moved on. A singular piece of good fortune overtook him at this 
point. Shortly after his disappearance a brief newspaper story 
told how a prisoner, Basileios Zaharoff, in an attempt to escape 
from the old prison of Garbola in Athens, had been shot and 
killed by a sentry. Zaharoff had made one friend in Athens — 
Stephen Skouloudis, later the compliant premier of King Constan- 
tine in his attempt to put Greece on the side of Germany, and 
then well on his way to riches. He had taken a fancy to Zaharoff 
and he was shocked at this story of his death. 

Skouloudis went to Garbola, got a description of the prisoner 
who had been killed, had the body exhumed, and satisfied him- 
self that it was not his maligned young friend. He traced the inci- 
dent farther and learned that the shameful calumny had been 
printed by a reporter who hated Zaharoff. Having fled to England 
once more — this time to Manchester — Zaharoff returned to 
Athens as soon as he heard of Skouloudis’ vindication of him to 
take advantage of the sympathy created for him by this shocking 
injustice. This seemingly happened in 1877. He needed work 
and Skouloudis added another claim upon his gratitude by recom- 
mending him to the representative of a Swedish gun maker, who 
was leaving Greece and looking for a successor. Zaharoff got that 
job, rushed in a frenzy of gratitude to Skouloudis’ home, fell 
upon his knees, covered his hands with kisses and tears, and 
swore eternal friendship. Thus the first phase of the career of 
this young Monte Cristo ended. Strangely, one does not hear of 



further contact with Skouloudis until 1915, when Skouloudis was 
made Prime Minister of King Constantine and Zaharoff was the 
brains and moneybag behind the conspiracy of France and Britain 
to dethrone Constantine and bring the Greeks in on the side of 
the Allies. 

m — 

Zaharoff — twenty-eight years old — was now in the munitions 
industry in which he spent the remainder of his eventful life. 
Torsten Vilhelm Nordenfeldt, a small Swedish manufacturer, 
commissioned Zaharoff as his agent for the whole Balkan terri- 
tory at a salary of five pounds a week, later augmented by com- 
missions. It was a small beginning, but in a most opportune time. 
The whole face of the munitions industry was changing — due to 
the pressure of inventors, politicians, and merchants. 

There was, of course, nothing new about the arms industry. It 
was not invented before the World War or by the German junkers. 
It is a business, like any other. Man, in his discussions with other 
men about questions of religion, statecraft, geography, trade, has 
always reached a point in the discussion where it has seemed wise 
to reply to his opponent by disemboweling him or knocking his 
brains out. The demand for instruments of discussion of this type, 
from the day of the leathern armor and the flint spear, has always, 
quite naturally, inspired thrifty entrepreneurs to provide them 
for profit. It is a business like law or prostitution or hanging or 
banking or making shoes. Before the conqueror can lift his sword 
the armorer must make one for him in his forge. Before armies 
can march there must be men — thousands, hundreds of thousands 
of them — who will make guns and cannon and tanks and trucks 
and uniforms and shoes and food. It is a business and must be 
run as such. It must have a producing department and a finance 
department and a sales department. And as it is the function of 
the production department to develop and produce better and 



deadlier means of slaughter, it is the function of the sales depart- 
ment to find buyers, nay more, to stimulate consumer demand. 

And so behind every great warrior and war has loomed the 
figure of the sutler, perhaps just a poor peddler following the 
troops with rum, or some magnificent gentleman in his counting- 
house doing business not with the private in the field, but with 
the chief of staff in his bureau. Behind Pericles was the shield 
maker Cleon. Behind Caesar was the banker Crassus and the war 
contractors of Rome. Behind Maximilian was Jacob Fugger and 
his rich copper mines in the Tirol. Behind Jeanne d’Arc was 
Jacques Coeur, who, like a true patriot, supplied the Maid with 
arms and funds, and, like a true munitioneer, sold arms, against 
the law of God Himself, to the infidel and was stripped of his 
wealth and clothed in sackcloth and made to murmur on his knees 
that he “had wickedly sent armor and arms to the Sultan, enemy 
of the Christian faith and of the King.” Cromwell had to have his 
army provisioner, the pious Thomas Papillon. Behind Louis XIV 
was Sam Bernard the banker and the Brothers Paris de Mont- 
martel; behind Napoleon stood Ouvrard. 

It is a strange business, indeed a little weird. Like any other 
business it calls for a special kind of man with a special kind of 
talent and a special kind of ethics. It is, indeed, in the words of an 
American agent of a large submarine manufacturer, “a hell of a 
business, where you have always to be hoping for trouble in order 
to prosper.” 

I do not pretend to fathom the depths of its ethics. Let someone 
unriddle for me this human enigma: M. de Wendel, Frenchman, 
built a great blast furnace in Briey. Briey lies on the German 
frontier; on the other side, in Germany, is Thionville with its huge 
German blast furnaces. There they are on either side of the frontier 
— Briey in France, Thionville in Germany. Briey belongs to M. 
de Wendel; Thionville to the Germans. The Great War begins. 
The French do not attack Thionville; they do not defend Briey. 
They withdraw their lines and permit Briey to fall into the hands 



of the Germans. Then throughout the war Briey and Thionville 
are operated as one huge war production unit by the Germans. 
They turn out iron and steel that is hurled in huge Big Berthas 
and little German machine guns at French poilus who are mowed 
down by the hundreds of thousands. First one officer and then 
another asks why France does not attack and silence Briey and 
Thionville. General Malleterre demanded an attack. M. Pierre 


Etienne Flandin, one day to be premier, an officer then, urged it 
at the front. Bombardment was begun by General Guillaumat, but 
stopped instantly by headquarters. Deputies clamored for its de- 
struction. A committee of the Senate urged it. Even the Cabinet 
asked why Briey and Thionville were not stopped. But nothing 
was done. They went ahead pumping out materials for Krupp’s 
throughout the whole war. When the war was over Briey was 
handed back to M. de Wendel unscathed. Who is M. de Wendel? 
What manner of man is he? What goes on underneath his vest? 
What goes on inside the heads of the men, the officers, the poli- 
ticians who protect “property” that is flooding its iron and steel 
to Krupp’s to slaughter French boys in a war for the very life of 
France? Are they monsters? Are they demons? Unfortunately 
they are not. And that is what makes it all so mysterious and so 
difficult to deal with. 

It was into this strange business that Basil Zaharoff stepped, 
carrying with him an almost ideal spiritual equipment for the 
job. It was not then a huge industry. Best known perhaps was 
Alfred Krupp, the cannon maker of Essen. At ten he inherited a 
modest iron foundry from old Frederick Krupp who had started 
it in 1823. At fourteen Alfred went into the business and slowly 
took over its direction. Cannon were made of copper. Alfred per- 
fected a solid crucible steel block from which he made cannon. 
But he had not yet perfected any projectile capable of pene- 
trating the intransigent mentality of military bureaucrats. Cannon 
were made of copper, had always been, must always be! Herr 
Krupp learned from the start that the way to sell cannon to the 
Prussian king was to sell them also to Prussia’s neighbors and 



enemies. He made his first sales to Egypt, then to Austria. When 
the Austro-Prussian War began, both armies fired Krupp’s cannon 
balls at each other, and his guns would have been working in both 
armies in the Franco-Prussian War but for Napoleon Ill’s refusal 
to buy them. Krupp’s cannon made Bismarck’s swift victory pos- 
sible. After that Krupp made and sold his cannon everywhere in 
1877 when Zaharoff entered the arms field. 

In England Thomas Vickers developed the little engineering 
plant of his late father into first a prosperous iron foundry mak- 
ing car wheels, cast-steel blocks and cylinders. He then turned to 
making gun barrels and armor plate and finally a growing line 
of weapons. 

In France, Joseph Eugene Schneider, a small banker, bought 
Le Creusot, an iron foundry and arms plant that had made 
weapons for France since Louis XIV. Schneider was on the verge 
of bankruptcy when Napoleon Ill’s adventures saved him, re- 
habilitated him, and made him rich. Schneider was trying des- 
perately to break into the international arms business but was 
meeting determined and successful resistance from Krupp. 

Over in America, the du Ponts, Colts, Winchesters, and Rem- 
ington were prospering as a result of the impetus from the Civil 
War. Eleuthere Irenee du Pont, son of the famous French radical, 
Pierre du Pont, emigrated to America, found the powder for hunt- 
ing quite poor, established a powder mill patronized by Napoleon, 
and supplied most of the powder used in the War of 1812. He 
was the friend of Jefferson, suffered the inevitable after-the-war 
slump, and got aid in France from Madame de Stael and Talley- 
rand. He then found rich markets in Spain and in South America 
when dictators and revolutionists fought it out, refused to sell 
to Cuba during our Mexican War because he feared his powder 
would go to Santa Anna (though he hated that war), grew rich 
when railroads and frontiersmen needed dynamite to blast the 
Western prairies and mountains and forests, sold all he could 
make to England, France, and Turkey during the Crimean War, 
and was the mainspring of the Union in the war between the 



states. In 1877 the du Ponts were already the dominating figures in 
the powder combinations being formed in America, and by 1897 
they were powerful enough to enter into an international arrange- 
ment by which the powder makers of America and Europe divided 
the world among themselves. 

Colt made revolvers, sold them to the soldiers and frontiers- 
men who conquered the Texas plains, failed, but grew rich 
through the Crimean and Civil Wars. 

Remington made a fortune with his guns in the Civil War but 
was ruined by the peace. But Remington recovered from the 
Civil War by diversifying his products, going into typewriters 
and sewing machines, and in 1877 he again had his agents in 
Europe contending for the business of the armies there. 

Winchester, whose guns had created a sensation at the London 
Fair in 1851, made a sensational repeating rifle during the Civil 
War, had thirty-eight establishments making small guns, when 
Zaharoff became a munitioneer, and had in the field one of the 
first of the world’s arms salesmen extraordinary, Colonel Tom 
Addis, who equipped Juarez in Mexico and whose guns sealed the 
fate of Maximilian. 

There were other smaller firms. But taken as a whole the muni- 
tions industry was not a vast affair. The men who made fortunes 
out of arms in earlier times — the Brothers Paris, Chatelain, 
Ouvrard, Rothschild, Bicker, Jacques Coeur — were not producers 
of arms or powder and ball. These things had always until the 
first half of the nineteenth century been made in small shops, by 
individual craftsmen, in little foundries, the largest of which hired 
only a few hundred men at most. The fortunes were made by con- 
tractors, middlemen, and brokers who assumed the function of 
collecting weapons, food, grain, clothing for the armies. But with 
the growth of Krupp and Schneider and Vickers and du Pont and 
the others, the business of producing weapons and explosives had 
taken on larger shape. 

All the drifts in the world were moving in the direction of the 
magic business into which young Mr. Zaharoff had stumbled. 



The customer of the munitions maker is the soldier. And Europe 
was learning how to produce many customers for him. France 
had begun it — republican France — with her mass conscription 
during the Revolution. But the practice had died out when, after 
1815, liberalism once more swept over Europe, until, with Napo- 
leon III, the whole dark movement of militarism took on life once 
more. Bismarck made almost every German a soldier. And after 
the Franco-Prussian War, every monarch in Europe was eager to 
copy the junker model. Then the nation did not wait for a war 
to raise an army, a small mercenary army. In every country armies 
were formed during peacetime, far outnumbering any that had 
ever fought in war. In short, every able-bodied man in Europe was 
a customer for the gun makers, and peace became as flourishing a 
period for them as ever war had been. Europe became an armed 
camp, and the Krupps and Schneiders and Vickers did not have 
to wait for war to do big business. France, sullen, mourning her 
“lost provinces”; Italy, nourishing the dream of “Italia Irri- 
denta”; Germany, preparing against France’s effort for revenge, 
Russia, with her pan-Slavic dreams, the Balkans, waiting for the 
day to free her enslaved peoples from Austria, Turkey, Germany — 
all made a perfect climate for the trade of the sellers of rifles and 
cannon and powder. 

Moreover, the manufacturers of death did not sit still. New 
and more terrible weapons were being fabricated. Smokeless pow- 
der, small-bore magazine rifles for accuracy and distance, rifling 
of gun bores, the French mitrailleuse blossoming into the machine 
gun, Krupp’s breach-loading monoblock guns, recoil appliances, 
the armored warship that began with the Merrimac and Monitor 
and the submarine— all these gave to the arms drummers a line 
of goods that introduced into armament the stimulating element 
of style and quality obsolescence and kept the ordnance depart- 
ments busy junking old weapons and buying new ones. 

This last element was one that told heavily on the side of the 
new arms salesman in Athens — Nordenfeldt’s new Balkan drum- 
mer. For Nordenfeldt, though small, had an attractive collection 



of lethal gadgets. He had the eccentric screw breach, the mechani- 
cal time fuse, an excellent quick-firing gun, and, wonder of won- 
ders, a submarine that he had invented. 

Zaharoff had to look for business in the Balkans. The Turko- 
Russian War had just ended. Greece saw herself left out of the 
division of loot and she determined to arm. She planned an army 
of 100,000 instead of 20,000 — 100,000 customers for the young 
arms drummer instead of 20,000. Of course, Zaharoff had to meet 
the competition of Krupp and others. But he was a Greek and, 
by this time, we may be sure, burning with patriotism and sales 

But he did not sell a submarine until 1885 when he planted one 
in the Greek navy. Having done this, the Greek patriot went to 
Greece’s enemy, Turkey, and sold two. By this time Hiram 
Maxim, the American, was running away with the business in 
quick-firing guns, for his Maxim machine gun outdistanced all 
rivals. He was going about Europe demonstrating it himself and 
getting orders. This was a serious matter for Nordenfeldt and 
his man Zaharoff. Just how it came about and who managed it, 
no one knows, but in 1886 Maxim and Nordenfeldt joined forces. 
But Zaharoff now held a substantial interest in the Nordenfeldt 

With this development, Zaharoff began to range over a terri- 
tory wider than the Balkans. He had established relations with 
many of the most influential persons in European war depart- 
ments, ministries, and noble social circles. He was the dominating 
sales force of the Nordenfeldt-Maxim combination. Gradually 
Nordenfeldt vanished out of the business, Zaharoff took his place 
as Maxim’s partner, and the firm took the name of the Maxim 
Guns and Ammunition Company, Ltd. It is a singular fact that 
Hiram Maxim in his autobiography makes no reference to 

The next step was another combination with Vickers, Thomas 
Vickers — the second largest English manufacturer of arms. 
Maxim became a member of the Vickers board of directors. 



Zaharoff’s name did not figure in the organization at all. But he 
and Maxim, in some proportion unknown to history, got for their 
company from Vickers £1,353,334, or over six and a half million 
dollars, partly in cash and partly in stock in the Vickers company. 
Zaharoff thus became a substantial stockholder in Vickers and 
would one day be the largest of all. He also became the chief 
salesman of Vickers which, unlike Krupp and Schneider, had 
remained up to this point out of the international market. But 
Zaharoff showed the way into this bountiful field, and thereafter 
he moved about Europe with a card announcing him as the dele- 
gate of Thomas Vickers & Sons. 

But Vickers was in no sense a great business. Its principal 
function had been supplying guns for the British navy. It was 
prosperous and imposing after the modest standards of that day. 
Its great growth dates from the absorption of the Nordenfeldt 
company, with Nordenfeldt’s submarine, Maxim’s machine gun, 
and the shrewd, dynamic salesmanship of Zaharoff. 


Nothing was wanting but romance now to complete the equip- 
ment of Basil Zaharoff for the principal role in a Dumas novel. 
And this he supplied upon a pattern perfectly in keeping with 
his character. In 1889, while he was ranging Europe — particu- 
larly Russia — for orders, he met Maria del Pilar Antonia Angela 
Patiocinio Simona de Muguiro y Berute, the Duchess of Villa- 
franca. She was the wife of a young man closely connected with 
the royal family of Spain. She proved useful to Zaharoff in 
arranging connections in Spain that enabled him to sell many 
millions of dollars of arms to the war department. But Zaharoff 
fell in love with her and urged her to divorce her husband, who 
was ill and on the verge of dementia. The Duchess, a good Catholic, 
would not consider divorce, but she became Zaharoffs mistress, 
confident that her husband was destined for a speedy death. His 
mind failed completely, he was put into an insane asylum, and 



proceeded to disappoint the Duchess and her lover by continuing 
to live for another thirty-five years. She continued as Zaharoff’s 
mistress; he remained attached to her with singular devotion and 
in 1924, when her husband died, the two lovers — then aged and 
near the end of their lives, he seventy-five and she over sixty — 
were married in a little town outside Paris. They had had two 
daughters. The Duchess, however, survived this marriage by only 
eighteen months and her death left the aged bridegroom incon- 

About the time he met the Duchess, Zaharoff established a home 
in Paris. He was rich and a man of striking, distinguished appear- 
ance; a small mustache and imperial and drooping eyelids added 
an expression of inscrutability to his grave countenance. He culti- 
vated the habit of silence. He avoided displays, public appear- 
ances. He took up his place in that foggy, ill-lighted world so 
fascinating to the readers of newspapers — the world of Behind 
the Scenes. He had acquaintances, if not friends, among the most 
important people in Europe. He was now a part owner, sales dele- 
gate, guiding spirit of a growing British armament firm, but with 
his home in France. He spoke Turkish, Greek, French, Italian, 
German, and probably various Balkan dialects. And the world 
was unfolding auspiciously if not beautifully before him in the 
grim business in which he flourished. 

As for Vickers, it now began to expand upon an impressive 
scale. By 1890 England set out upon a more ambitious naval 
program than ever. Vickers, which had been a builder of guns, 
now went into naval construction, as did Krupp in Germany. It 
acquired a controlling interest in Beardmore’s great shipbuilding 
firm in Glasgow. It took over the Naval Armaments Company with 
its dockyards, the Woolsey Tool & Motor Company and the Elec- 
tric & Ordnance Accessories Company. It became a great depart- 
ment store of lethal weapons and could supply its customers with 
anything from a rifle to a battleship. Sir Vincent Caillard became 
its financial genius as Zaharoff was its sales genius. They made 
an excellent team. Caillard knew how to mix the hard, cruel func- 



tions of gun-making finance with the more delicate and spiritual 
values of versemaking, like another and earlier munitioneer, Bon- 
nier de la Mosson, who accumulated a fortune as an army con- 
tractor in the time of Louis XV and exercised his leisure by 
writing verses so bad that Voltaire said they ought to be crowned 
by the Academy. Sir Vincent made music too and he found time 
amidst the dark sophistications of munitions finance to set to 
music Blake’s Songs of Innocence. 

Events favored them — the Spanish-American War, the Chinese- 
Japanese War, the English-Boer War, in which the Tommies, 
armed with Vickers rifles, were scientifically mowed down with 
Maxim’s pom-pom, or quick-firing cannon, supplied to the Boers 
by M. Zaharoff of Vickers. But the greatest opportunity was the 
Russo-Japanese War. When it ended all Europe’s war ministries 
awoke. The war had been a great proving ground for guns and 
ships — a laboratory for militarists. Above all, Russia had to start 
at the bottom and completely rebuild her shattered armies. The 
Czar provided over $620,000,000 for rearming. All the armament 
makers in the world flocked to St. Petersburg. Zaharoff, repre- 
senting Vickers, arrived first on the scene. He spoke Russian 
fluently. He was a member of the Orthodox Greek Church. He 
had spent much time in Russia. He knew his way around. 

The Schneider-Creusot firm felt it had a special claim on Rus- 
sian business. Was not Russia France’s ally? Were not French 
bankers financing Russia? There developed swiftly a struggle 
between Schneider and Vickers out of which Zaharoff emerged 
with the largest share of the booty. Indeed, this particular episode 
established him definitely as the great master arms merchant of 
the world. 

This fight centered upon two projects — the Putilov munitions 
works and a plan to erect a new and comprehensive artillery plant 
somewhere in Russia. 

The contest became somewhat complicated, as all armament 
contests in Europe are. Behind Schneider was the Banque de 
l’Union Parisienne, in which he held a large interest. Oddly enough, 



allied with Vickers was another French bank — the Societe 

The Putilov works had been heavily financed by Schneider with 
PUnion Parisienne funds. But Putilov needed more funds. And 
to make matters worse, Putilov was out of favor. Schneider, de- 
spairing of continuing successfully to find an outlet for French 
arms through Putilov, conceived the idea of building for Russia 
an entirely new plant in the Urals. But Zaharoff was at work on 
the same idea, got the inside track, and came off with an arrange- 
ment to build for Russia the huge arsenal of Zarizyn at a cost 
of $12,500,000 — the largest in Russia. Besides that, Zaharoff and 
certain English interests with whom he was working got large 
contracts through the St. Petersburg Iron Works and the Franco- 
Russian Company. With the Russian Shipbuilding Company he 
got contracts to build two battleships, white Beardmore, Vickers’ 
subsidiary, got a dockyard and a cannon factory. This was a 
severe blow to Schneider. And all the time that Zaharoff was work- 
ing for this he had a paper in Paris, Excelsior, which was pumping 
out propaganda continuously for more French loans to Russia — 
French loans that Russia could spend with Vickers. 

Schneider now turned his attention again to salvaging the Puti- 
lov works and strengthening his hold upon it. He could get no 
more financing from PUnion Parisienne, because it already had 
too much tied up in Putilov and frozen in Balkan investments. 
He appealed in desperation to the Societe Generate, which was 
secretly allied with Zaharoff and the English, though a French 
bank. He was, of course, refused. Indeed the Societe Generate 
took advantage of Schneider’s embarrassment, doubtless assisted 
by Zaharoff, to force Schneider out of Putilov altogether. It be- 
came a fight between two French banks and a French munitions 
magnate for Russian business. But at this point Mr. Schneider 
executed one of those tactical movements we encounter in an 
Oppenheim international mystery novel. 

One day Paris read in the Echo de Paris a brief dispatch, date- 
lined in St. Petersburg. “There is a rumor,” it reported, “that the 



Putilov factories at St. Petersburg will be bought by Krupp. If 
this information is well founded, it will cause great concern in 
France. It is known indeed that Russia has adopted French types 
of guns and munitions for her naval artillery and coast defenses. 
The greater part of the material produced at this time by Putilov 
was made in collaboration with the Creusot factories and the 
technical staff which the latter sent to the spot.” 

Here was a provocative item packed away in this little para- 
graph. Putilov made French guns from French plans. Krupp would 
get Putilov. Into the German hands would fall all the French 
ordnance secrets. This was the alarming message in that dispatch. 
Most disturbing of all, France’s great secret gun — her carefully 
guarded 75-millimeter — would now come into the possession of 
Krupp’s engineers. The little item swelled rapidly to a press sen- 
sation. Krupp denied the story. Vickers, also linked with the sale 
in some papers, denied it. France must not suffer this disaster. 
Russia wanted a loan of $25,000,000 for railway rehabilitation. 
The ministry appealed to patriotic Frenchmen to band together 
to make the Russian loan and as a condition perpetuate Schnei- 
der’s hold on Putilov. The pressure was too great to withstand. 
The loan was made. Schneider got his financing for Putilov. Even 
the Societe Generale had to help Schneider. 

It was some years before France learned that the whole dis- 
patch incident was a hoax. Mr. Albert Thomas, director of the 
International Labor Office in Geneva, in 1921 made a speech there 
describing how French industrialists boasted to him that they had 
forged the St. Petersburg dispatch in the office of Echo one night 
at ten o’clock, and how they had done it not because Putilov was 
threatened by Krupp but by another French group. They did not 
hesitate, in this contest for control of a Russian plant, to stir up 
public opinion against Germany, to set the old chauvinist pot to 

Zaharoff had failed in his maneuvers to drive the French out 
of Russia altogether, but he captured for Vickers and other Eng- 
lish arms makers the largest share of Russia’s munitions millions. 




Thus the arms makers drove Europe along up to 1914. The 
airplane had arrived, and Vickers added airplane production to 
its growing interests. In Paris M. Zaharoff endowed a chair of 
aviation at the Sorbonne. Indeed, M. Zaharoff, for all his pains 
to elude the spotlight, found that revealing beam playing upon 
him at intervals and to his discomfiture. Who is this M. Zaharoff? 
What is he? To what country does he owe allegiance? He was 
born in Turkey. He is a Greek. He is a French citizen. He is an 
English businessman. But what country does he serve? And what 
sort of game is he playing in France? These were not pleasant 
questions for one who, indeed, had what Mr. Roosevelt calls a 
passion for anonymity. Hence the endowed chair at the Sorbonne. 
And then a home for French soldiers. His name appeared upon 
subscription lists for all good French causes. And then the French 
ministry conferred upon him the rosette of an officer of the 
Legion of Honor — a reward for the chair at the Sorbonne. 

Vickers grew, spread out — plants in Britain, Canada, Italy, 
Africa, Greece, Turkey, Russia, New Zealand, Ireland, Holland; 
banks, steelworks, cannon factories, dockyards, plane factories, 
subsidiaries of all sorts; an arms empire. It had share capital 
larger than Krupp’s and had more extensive connections and pos- 
sessions than Krupp’s. And this growth was chiefly the work of 
the French citizen of Greek blood who, acting the role of am- 
bassador-salesman, had planted the Vickers standard all over the 
world, from Ireland to Japan and from the North Sea to the 

It was done with the aid of British-government backing and 
pressure, the immense financial resources of British finance; by 
means of bribery and chicanery, by the purchase of military and 
naval authorities and the press wherever newspapers could be 
bought. It is a dark, sordid story of ruthless money getting with- 
out regard for honor, morals, and either national or humane 



considerations, while the Europe which they upset with their con- 
spiracies and terrorized with their war scares, and to which they 
sold hatred as the indispensable condition of marketing guns, slid 
along with the certainty of doom into the chasm of fire and death 
in 1914. 

On March 18, 1914, on the very brink of the coming disaster, 
Philip Snowden, disease-wracked, crippled socialist labor leader 
rose in Commons to make a speech. When he had done, he had 
rocked the British Empire with his disclosures. For two years 
a young Quaker socialist named Walton Newbold had been trac- 
ing with infinite pains the tortuous trail of the international arms 
makers. And Philip Snowden had in his possession the fruits of 
that long quest when he rose to speak. One by one he pointed out 
cabinet ministers, members of the House, and named high-rank- 
ing officials in army and navy circles, persons of royal position, 
who were large holders of shares in Vickers and Armstrong, in 
John Brown and Beardmore, shipbuilders. 

The profits of Vickers and Armstrong had been enormous, and 
the most powerful persons in the state and the church and the 
nobility had bought into them to share in the profits. Vickers had 
among its directors two dukes, two marquesses, and family mem- 
bers of fifty earls, fifteen baronets, and five knights, twenty-one 
naval officers, two naval government architects, and many jour- 
nalists. Armstrong had even more — sixty earls or their wives, 
fifteen baronets, twenty knights, and twenty military or naval 
architects and officers, while there were thirteen members of the 
House of Commons on the directorates of Vickers, Armstrong, or 
John Brown. “It would be impossible,” said Snowden, “to throw 
a handful of pebbles anywhere upon the opposition benches with- 
out hitting members interested in these arms firms.” 

Ministers, officers, technical experts moved out of the govern- 
ment, out of the cabinet, the navy, the army, the war office, the ad- 
miralty, into the employ of the munitions manufacturers. 

Snowden quoted Lord Welby, head of the Civil Service, who only 
a few weeks before had denounced the arms conspirators. “We are 



in the hands of an organization of crooks,” said Lord Welby. “They 
are politicians, generals, manufacturers of armaments and journal- 
ists. All of them are anxious for unlimited expenditure, and go on 
inventing scares to terrify the public and to terrify the Ministers 
of the Crown.” 

Every business attracts to itself men who have the taste, talent, 
and the morals suited to its special requirements. This armament 
world of Europe was a behind-the-scenes world of intrigue, chi- 
canery, hypocrisy, and corruption. It involved a weird marriage be- 
tween burning patriotism and cold, ruthless realism. And the men 
who rose to leadership in it were men who combined the vices of the 
spy, the bribe giver, the corruptionist. They played with an ex- 
plosive far more volatile and dangerous than anything made in their 
laboratories — chauvinism — and they did it with ruthless realism. 
There was, indeed, something singularly brutal about their realism. 

The trail of that vast armament effort between 1877 and 1914 is 
stained by a record of bribery of admirals and generals, civil ser- 
vants of all degrees ranging from cabinet ministers to messengers. 
One German armament maker said that “Krupp employs hundreds 
of officers on leave or withdrawal at high salaries for doing nothing 
much at all. For some families Krupp factories are a great sinecure 
where nephews and poor relations of officials whose influence in 
war is great find themselves jobs.” 

In 1913, a year before Snowden’s exposures in the House of Com- 
mons, Dr. Karl Liebknecht, socialist leader in the Reichstag, made 
a series of grave charges against German armament leaders that re- 
sulted in the trial and conviction of the secretary-superintendent of 
the Ministry of War, four arsenal officials, and four lieutenants and 
others, including Brandt, the Berlin agent of Krupp. A year later, 
about the time that Snowden was shocking his colleagues in Par- 
liament, Liebknecht again brought a series of charges against the 
corruption of Japanese officials by Siemens-Schuckert, another 
German arms concern. This led to the scandal unearthed by the 
Japanese Diet and showing that M. Zaharoff’s firm of Vickers, 



along with the Mitsui Bussan Kaisha, had paid out $565,000 in 
bribes to Japanese officials to clinch the contract for the building 
of the battleship Kongo. Of course no espionage could follow the 
numerous and devious trails of the arms makers. It is strange that 
even so much of their corruption came to light. But what was ex- 
posed can be taken as no more than samples of the manner in which 
their business was conducted. 

The whole excuse of this industry was national defense. Yet these 
enterprises were as busy supplying the armies of their enemies as 
the armies of their own countries. Up to the time of Alfred Krupp ’s 
death in 1887 he had made 24,576 cannon of which only 10,666, 
or less than half, were sold to the fatherland for national defense. 
The rest went to Germany’s enemies and neighbors. Some of them 
— Austria and China — were supposed to be her allies. But Austria’s 
Krupp cannons sent death through German ranks in the Austro- 
Prussian War, and when, in the Boxer rebellion, a German warship 
attacked a Chinese fort, the cannons Krupp sold to Li Hung Chang 
dealt death and destruction to German sailors. When Italy and 
Turkey fought in 19x1 Turkey used a fleet largely supplied by 
Italy. And when Italy and Germany fought in the World War, 
Italy had a fleet of seventeen vessels built in German shipyards. 
Zaharoff had got from Turkey contracts for two dreadnaughts and 
a fleet of destroyers to patrol the Dardanelles, which were con- 
veniently on hand when the British soldiers were landed in 1915 
to attempt to carry that stronghold. Earlier still, British Tommies 
in South Africa were mowed down by Maxim’s quick-firing cannon 
— the pom-poms — which Zaharoff for Vickers had sold to the 
Boers. The story is an endless one. It includes even the sinking of 
the Lusitania, which played so large a part in bringing America 
into the war. For this was the feat of a German submarine built 
upon plans supplied before the war to Austria by the Electric Boat 
Company, American submarine builders. 




The fame of Krupp — the part he, Alfred, and his son Fritz played 
in the development of the junker regime in Germany — gives to the 
name Krupp a kind of premiership among the Merchants of Death. 
And while Krupp never attained the size and expansion of the 
Vickers firm that Zaharoff built, and particularly of the Vickers- 
Armstrong firm, when these two were combined after the war, yet a 
special notice ought to be taken here of this vast German arms ma- 
chine. Old Alfred Krupp, high-handed, overbearing, ruthless pur- 
suer of wealth, died in 1887. The little steel plant at Essen had only 
about thirty employees when he began work in it. When Zaharoff 
entered the arms industry in Greece it had grown to a great enter- 
prise employing over 16,000 men. Old Alfred went to his death a 
wretched, isolated misanthrope. He left as his heir his son Fritz, 
thirty-three, delicate, shy, sensitive, unpromising, who had filled 
various posts in the business since he was twenty in preparation for 
his destiny. 

Fritz Krupp immediately embarked upon a policy of expansion, 
making armor plate, buying up shipyards at Kiel to be ready for 
the era of naval expansion that the youthful von Tirpitz was even 
then brewing. 

Bismarck was let out, the last brake upon unrestrained mili- 
tarism was removed, young Kaiser Wilhelm became a close friend 
and frequent visitor and hunting companion of Fritz Krupp. Von 
Tirpitz was made Secretary of the Admiralty, the first naval act 
was passed to spend 150 million marks on ships, and Krupp got the 
lion’s share. The German Navy League was called into being. With 
the aid of large subsidies from Krupp and Stumm and other arms 
patriots, it unloosed upon the German people a flood of high- 
powered patriotic propaganda, backed by the Kaiser. The junker 
age was now in full career. Wilhelm ordered that half of all arma- 
ment contracts be awarded to Krupp and the rest divided among 
the other German munitioneers. Germany kept her arms contracts 



at home. Krupp’s mills, shipyards, and docks became indispensable 
to Germany, not only for war purposes but for peace. It was a vast 
industry that employed many men and provided still more employ- 
ment among all the raw-material industries upon which it drew. 
When the Hague conference was discussed in Germany, looking 
toward disarmament, the militarist ministers asked what would be- 
come of Krupp’s business if Germany disarmed. They put that in 
writing, and the Kaiser wrote upon the memorandum the question, 
“How will Krupp pay his men?” Armament had become a corner- 
stone of the German internal economic policy. 

Fritz Krupp grew ever richer, worth 119 million marks in 1895, 
187 million marks when he died in 1902. He had an income of seven 
million marks in 1895 and twenty-one million in 1902. He had put 
aside the severe manner of life of the crusty old Alfred. He had be- 
come an industrial monarch. He dwelt in three great German cas- 
tles — Hugel on the Ruhr, Sayneck in the Rhine Valley, and 
Meineck in Baden-Baden — and was a member of the Prussian 
State Council, of the federal House of Lords, a Privy Councilor, 
surrounded by flatterers and parasites. 

He was destined to a melancholy end. A man of strange tastes 
and mystifying behavior, he kept his wife in an insane asylum and 
acquired a place at Capri, the Hermitage of Fra Felicia, which he 
called the Holy Grotto. He had attendants clad in the gowns of 
Franciscan monks. He formed an “order” — an association of men, 
the members of which had keys to the Holy Grotto. There gargan- 
tuan feasts were spread. There the Cannon King II held wassail 
until the dawn sometimes — orgies, these feasts were called by the 
islanders. Presently Neapolitan papers printed stories about them. 
One German paper, the Vorwdrts, retold the tales, more than in- 
sinuating that this was a homosexual “abbey.” Fritz Krupp sued 
the Vorwdrts. Socialist deputies flew to the charge, the episode be- 
came a national scandal in which the Kaiser felt called upon to 

Then on the night of November 21, 1902, when the prosecution 
of the Vorwdrts was being prepared, Fritz Krupp died alone in his 



bedroom. Whether he died of a stroke or killed himself remained a 
subject of violent controversy in Germany for many years. Cer- 
tainly, contradictory reports about his manner of death were issued. 
The Kaiser went to Essen and walked on foot behind the corpse to 
silence scandal. The prosecution of the Vorwarts was dropped. And 
the widow, until Fritz’ death held as an unbalanced person, assumed 
command of the vast enterprises and administered them for a while 
with drive and vigor. 


When the war broke over Europe the moment of paradise for the 
arms makers was at hand. At first glance it may appear singular 
that the activities of Zaharoff during the war remain so obscure. 
But if ever there was a time when Europe needed no munitions 
salesmen it was after 1914. The salesman’s work was done. The war 
— modern war, the greatest, most insatiable customer of the muni- 
tioneers — had come into the market. Generals and admirals clam- 
ored for more and ever more arms and explosives. The work of the 
salesmen of death was over, for the moment, anyway. Therefore 
Zaharoff’s industry did not need his peculiar abilities. 

But the moment came when Britain and France desired Greece 
as an active ally in the war. This was when England launched her 
attack upon the Dardanelles. The Greek government was divided. 
The pan-Hellenic Venizelos, his majority in the chamber, and the 
National Council favored joining the Allies. Constantine, King, 
brother-in-law of the Kaiser, pro-German, favored neutrality. He 
was popular in Greece because of the recent Balkan victories. The 
King dismissed Venizelos. In June the voters returned Venizelos to 
power. The chief objective of the Allies at the moment was to keep 
Bulgaria out of the war, hence the threat of Greek participation on 
the Allied side. Bulgaria mobilized in September, 1915. Venizelos 
ordered a countermobilization. The King permitted it until he heard 
that Venizelos proposed to go to the aid of Serbia. Then he dis- 
missed the Premier again. 



At this juncture Zaharoff’s offices were enlisted. When Venizelos 
was dismissed, Constantine named Skouloudis, Zaharoff ’s old friend 
and benefactor, as Premier. Perhaps this may have accounted for 
Zaharoff’s interest. Perhaps he would be able to work the miracle 
with Skouloudis. But there was another reason. The Greek problem 
now literally assumed the form of a conspiracy to dethrone the King 
and drive him out of Athens. This was a business into which France 
and England could not very well enter officially. They dared not 
supply funds for the purpose. After all, Greece was neutral and on 
terms of friendly intercourse with France. Briand, therefore, drew 
away from having any direct part in managing or financing a plan 
to upset the monarchy in Greece. But Zaharoff, a private citizen, 
could do this, particularly if he supplied his own money. Just before 
Christmas, 19x5, therefore, Zaharoff had a conference with Briand 
and agreed to assume the job of bringing Greece in on the side of 
the Allies or of ousting Constantine. Briand notified Venizelos of 
this good fortune. And Zaharoff set about his task. 

Just how much he did personally, what steps he actually origi- 
nated, and what pressures he organized and directed are not known. 
The money for the campaign is supposed to have been supplied by 
him and it is also reported to have run into many millions. Whether 
it was furnished by him or Vickers or various other interests is also 
not known. The propaganda in Greece, handled by a French naval 
attache, had been execrable. He was relieved of his clumsy per- 
formances, and an instrument called the Agence Radio was set up 
to go to work upon the Grecian mind. It resorted to all the familiar 
devices of international propaganda. It subsidized newspapers, 
bribed editors, issued pamphlets, financed meetings, and generally 
managed all the standard techniques of underground activity. For 
one thing it played heavily upon Allied successes. In Europe every 
small country wanted to be on the winning side. And Zaharoff’s 
Agence Radio pumped up such endless whoppers about French and 
English victories that the Russian minister in Athens protested that 
it was absurd. 

Zaharoff, if he tried to do anything with his old friend Skouloudis, 



failed, for the Premier stuck to the King and worked incessantly for 
neutrality. But Constantine was growing weaker and Venizelos 
stronger. Finally, when the time was ripe, Venizelos went to Sa- 
lonika, where the Allies had landed, and organized a revolutionary 
government which resulted in the abdication of Constantine in June, 
1917. Greece joined the Allies and the following year threw 2 50,000 
men into the great Macedonian offensive that forced the surrender 
of Bulgaria. 

This was an important service, for the defeat of Bulgaria, with 
which Greece’s participation had much to do, was the first great 
crack in the enemy front. Zaharoff was busy in other directions. He 
endowed a chair of aviation at the University of St. Petersburg and 
made $125,000 available in England for the study of aviation prob- 
lems. He subscribed 200,000 francs for a war hospital at Biarritz. 
Mr. Lewinsohn, his most industrious biographer, credits him, upon 
the authority of the Paris Temps, with contributing not less than 
So million francs (about $10,000,000 at prewar value) to the cause 
of England and France during the war. 

But Zaharoff was not done with Greece. The armistice did not 
end the dreams of that relentless Cretan patriot, Venizelos, for the 
realization of his pan-Hellenic dreams. Zaharoff met Venizelos for 
the first time in 19 18. And at Zaharoff’s villa the two Greeks planned 
great gains for Greece out of the victory about to be won. The story, 
much oversimplified, runs about as follows. Zaharoff, Greek to the 
core despite his many other national encrustations, proposed to 
finance Venizelos in the realization of his dreams of expansion in 
Asia Minor. In May, 1919, Venizelos won from the allied states- 
men their consent to occupy Smyrna. In August, 1920, the Treaty 
of Sevres gave to Greece Smyrna, its hinterland and a large terri- 
tory in Asia Minor. With Zaharoff’s funds Venizelos began to oc- 
cupy these territories. Lloyd George, British premier, supported 
Venizelos completely in these adventures. 

But quickly a series of misfortunes overtook the great Greek 
statesman. First, France lost interest in her Greek ally. Then un- 
rest spread rapidly through Greece against Venizelos. The repre- 



hensible behavior of his subordinates in Athens, while he worked 
with the powers in Paris, produced profound dissatisfaction, which 
the agents of the absent Constantine skillfully exploited. However, 
Constantine’s son, Alexander, was King and Venizelos seemed se- 
cure with him. Then suddenly, young Alexander, bitten by a mon- 
key, died of the infection, and the whole Greek political situation 
was thrown into chaos. Venizelos, absent so much at the Paris con- 
ferences, had lost control and in an election forced in November, 

1920, his ministry was defeated. Within a month Constantine re- 
turned to power, Venizelos was an exile, and Zaharoff’s plans were 
in the fire. 

But the end was not yet. Constantine pressed on with Venizelos’ 
grandiose plans, launched an ambitious Greek offensive in July, 

1921, suffered a decisive defeat at Sakaria, and in September was 
driven from Smyrna by a revamped and refurbished Turkish army 
under Kemal Pasha, which burned that hapless city to the ground 
in one of the great disasters of history. Constantine was forced 
again to retire. By this time Lloyd George was being bitterly as- 
sailed in England for accepting the advice of Zaharoff, and, in the 
end, the ministry of Lloyd George was wrecked upon the rock of 
the Grecian debacle. Zaharoff, we are assured, lost an immense slice 
of his fortune in this daring and ambitious design to create a great 
Hellenic empire in Asia Minor. 

But this scarcely tells the whole story. Lord Beaverbrook had 
said that “the destinies of nations are Zaharoff’s sport.” It was not 
all sport. It was the kind of sport — gamble is the better word — in 
which the wily old schemer played for high stakes. As early as 1918 
Zaharoff began to plan for certain undisclosed adventures. While 
the armies of the world strained on to the last scene of the war, 
Zaharoff laid plans for the coming peace. He bought a bank in Paris 
— the Banque Mayer Freres — renamed it the Banque de la Seine, 
reorganized it, capitalized it at 12 million francs, and very quickly 
increased this to 30 million. This was about the time he met Veni- 
zelos and concocted with him the Grecian program. 

Later, in 1920, the Greeks had occupied Smyrna and the Allies 



were in possession of Constantinople. At that time, as the Greeks 
prepared for their offensive in Asia Minor, he founded a new bank 
in Constantinople — the Banque Commerciale de la Mediterranee. 
Had not Beaverbrook said, “In the wake of war this mysterious 
figure moves over tortured Europe.” This bank was capitalized at 
30 million francs, its ownership resting in the Banque de la Seine. 
It set up for business in the quarters of the Deutsche Orientbank. 
Next he organized the Societe Frangaise des Docks et Ateliers de 
Constructions Navales and planned to take over the docks of the 
Societe Ottoman. For whom? All these companies were French in 
name at least — there was no smell of the hated Briton anywhere. 
But this would have given Zaharoff control of the most important 
naval docks in Turkey. Could it be for Vickers? For whom else? 
But the Turks refused to let M. Zaharoff have these valuable prop- 
erties. And when this occurred did not the British government de- 
mand that Kemal Pasha turn them over to Vickers and Armstrong? 

There was something more than Greek patriotism in Zaharoff’s 
league with Venizelos. Beaverbrook said: “The movement of armies 
and the affairs of governments are his special delight.” He had in- 
spired the movements of the Greek armies. He had insinuated him- 
self as the adviser of Lloyd George in Asia Minor. The British 
Prime Minister had made Zaharoff’s plans part of his policy. Za- 
haroff had spent, it was said, four million pounds — $2 0,000,000 — on 
the Greek campaign. But there is really no evidence of this. So far 
as I can find, the statement rests upon a single question, by a mem- 
ber of the British Commons, Mr. Aubrey Herbert in 1921, during 
an interpolation — a question which Mr. Bonar Law parried. How 
much Zaharoff spent and whether it was his money or that of the 
English armament firms under his leadership, who were using the 
disturbed state of eastern Europe to get possession of valuable prop- 
erties there, remain completely unriddled. Their plans did not turn 
out well. The collapse of what is called M. Zaharoff’s personal war 
with Turkey — the Greco-Turkish War of 1920-22 — the disastrous 
defeat of the Greeks, the awful tragedy of Smyrna, and the execu- 



tion of most of the Greek cabinet ruined all Zaharoff’s plans and 
brought him the loss of millions. 

But long before the disaster the name of Zaharoff was being whis- 
pered around the clubs in London as the author of Lloyd George’s 
highly unpopular policy in Greece and Turkey. Mr. Walter Guin- 
ness attacked the Prime Minister in the House on this score in 
August, 1920, when the Turks started their vigorous counterattack. 
The next year Lloyd George was again assailed in Commons with 
greater effect by Mr. Aubrey Herbert. And when the great catas- 
trophe at Smyrna shocked Europe, Lloyd George found himself at 
the end of his rope and resigned. 

These Turkish enterprises were not the only fields into which 
Zaharoff’s Banque de la Seine ventured. Very quietly, without fuss 
or trumpets, the Banque de la Seine became the owner of a company 
called the Societe Navale del’Ouest — a shipping company equipped 
to transport oil. Then another company appeared — the Societe 
Generale des Huiles de Petrole. Fifty-five per cent of its stock 
belonged to the Societe Navale de l’Ouest, the Banque de la 
Seine, and Zaharoff, and forty-five per cent to the British 
government-owned Anglo-Persian Oil Company. This Societe 
Generale was no small affair. Its capital in 1922 came to 227 
million francs. It took over or formed other corporations with 
refineries, so that by 1922 Zaharoff had organized in France a 
British-owned integrated oil industry. 

These projects were typical of the Zaharoff technique. In both 
cases he was acting as a Frenchman, a citizen of France, organizing 
what seemed to be French companies — one group to exploit the 
armament possibilities of Turkey and Greece for Vickers, the other 
group to exploit French territory for the Anglo-Persian oil interests 
of the British government. Always a large part of the working ma- 
chinery and certainly the meaning of Zaharoff projects were under- 
ground. He was the mysterious entrepreneur, the schemer moving 
in the dark, playing with behind-the-door intrigues, twisting silently 
along tortuous routes for undisclosed agents. Various writers have 



woven different surmises out of all these performances. But unfor- 
tunately most of the factors in the problem of Zaharoff s designs 
remain unknown. The most that can be said with assurance of cer- 
tainty is that he, accepted as a citizen of France, honored by the 
ministry, and enjoying the confidence of her most powerful minis- 
ters, used France — as indeed he had always done — as a base for 
managing an English trade offensive, trade in arms and in oil in 
France and the Near East, in direct conflict at many points with the 
French government’s own objectives. 

He is credited with immense losses in the fatal Greco-Turkish 
War. Doubtless he lost heavily, but doubtless also, his losses were 
shared by his colleagues in Vickers. He is also credited with being 
able to offset these losses with his new profitable oil investments. 
What these investments were worth to him must also remain a mys- 
tery. In the end his Banque de la Seine fell upon troubled days and 
he let it go. After a brief effort to adjust it to the new conditions, he 
saw, doubtless with complacence, others take it over. It is an ex- 
traordinary feature of these Grecian and Turkish and Anglo-Per- 
sian oil transactions that, though they form part of the history of 
the period that has been raked over by historians, and though Zaha- 
roff beyond doubt was the field marshal directing them in France, 
his personal movements throughout remain in complete obscurity. 
No major figure has succeeded so completely in cloaking his move- 
ments as this master-intriguer. 


Zaharoff suffered losses, staggering ones. Seemingly the war had 
brought a magnificent harvest for the war profiteers. In America 
firms like Calumet and Hecla Copper had had, at the peak, as much 
as 800 per cent profit on their capital stock. In the two years of 
1916 and 1917 the United States Steel Corporation showed a 
profit of $1,100,000,000. The Bethlehem Steel Company averaged 
profits of $48,000,000 a year during the four years of the war. In 
the year before the war Vickers had a profit of roughly $5,000,000. 



During the war, of course, it drove forward in a hot frenzy of 
production. It delivered to the armies and navies 100,000 machine 
guns, 2528 naval and field guns, thousands of tons of armor 
plate, built four battleships, three armored cruisers, fifty-three 
submarines, three subsidiary vessels, and sixty-two smaller boats. 
Under a British act its earnings could not exceed by more than 
twenty per cent the average of the two years preceding the war. 
But its capital was greater and its production was greater and 
earnings were calculated proportionately on production. 

A day came, however, when all those thousands of guns that 
Vickers and Armstrong and Krupp and the rest had made for the 
warmakers went terribly silent. The greatest disaster of all had 
fallen upon the arms makers — the disaster of peace. As one writer 
has put it, Krupp’s immense tangle of machines in Essen “stopped 
with an audible jerk.” Suddenly there was nothing for the 165,000 
employees of Essen to do. It was the same in Sheffield. It took the 
men who ruled these great mills a little time to realize what had 
happened to them. The great expansion of plant during the war 
was now no longer needed. And, for that matter, the expansion that 
preceded the war was, for the moment, excessive. 

But apparently Vickers believed it could survive. How far 
Zaharoff’s counsels ruled in this error no one has told. He was the 
driving spirit of expansion always. He was directing in France the 
extension of operations into the Near East. He went to Rumania to 
bargain with the government. Representing Vickers, he offered a 
loan of three million pounds to save Rumania from a currency col- 
lapse, asking in return a mortgage upon the Rumanian railroad 
revenues. This has a bearing upon his attitude toward the expan- 
sionist policy of Vickers after the war. A new arms concern was 
started in Poland in combination with Schneider, a shipyard was 
built on the Baltic, munitions factories were taken over in Rumania, 
the British Westinghouse Company was absorbed, the company 
went into the production of railroad equipment. It actually in- 
creased its investment in new plants by $85,000,000. 

Doubtless they believed there was life in the old militarist car- 



cass yet. There were the new nations just formed which had to have 
weapons. Then their greatest competitor was literally wiped out. 
Krupp was required by the Allies to destroy 801,000 tools and ap- 
pliances, 157,000 cubic yards of concrete and earthworks, 9300 
machines of all sorts, 379 installations, and 159 experimental guns, 
and was forbidden to manufacture arms. Krupp became a huge 
warehouse and miscellaneous fabricator of all sorts of things. And 
so Vickers and doubtless Zaharoff believed there would be plenty of 
orders again when the world settled down to its routine of business, 
diplomacy, intrigue, treaty violations, ancient hatreds and new ones 
again. And they were right. But it would not come in time. For the 
time being the game was up. 

Vickers went from loss to loss and from crisis to crisis. A com- 
mittee had to be named to look into its affairs. The report was a 
dark one. It called for drastic reorganization, shrinkage, liquidation 
of stock. The alternative was bankruptcy. The reorganization was 
effected. Two thirds of the stock was wiped out. Douglas Vickers 
was eliminated. Sir Herbert Lawrence became its head. Zaharoff, 
sustaining a huge stock loss, doubtless slid quietly out of any im- 
portant place in the control thereafter. This was in 1925. A little 
after this, Armstrong was in even worse trouble. It suffered reor- 
ganization which ended in a combination with Vickers, and Vickers 
took the lion’s share. The firm became Vickers-Armstrong. This 
was in 1927, just fifty years after Basil Zaharoff in Athens had be- 
come a five-pound-a-week salesman for Nordenfeldt, later to be 
merged with Vickers. And so Vickers’ directors met and presented 
to Sir Basil Zaharoff a cup on the completion of his half century of 
service with the firm and “as a mark of their great appreciation of 
the valuable work he has done for them and of their sincere grati- 
tude and concern.” 


The frowns of Sir Basil’s war god, however, did not leave him des- 
titute. He had lost a few hundred million francs. But there were 



many millions left. What he had lost, of course, was his place at the 
center in the great game of moving armies, gambling statesmen, 
scheming gun peddlers. He lived in his mansion in the Rue Hoche 
in Paris for some months each year, then in his Chateau Balincourt 
on the Riviera and the Hotel de Paris in Monte Carlo in the severe 
winter months. He had been an old patron of the beautiful Blue 
Coast. The Casino in Monte Carlo, after the war, was in trouble. 
Its old owner, Camille Blanc, somehow had lost touch with the 
changed world, particularly the changed world of money. The 
Prince of Monaco, in whose domain the great Casino nestled, 
wanted to get rid of Blanc, to bring in a business management of 
the institution that supplied him with his revenue and his small 
principality with its support. He approached Zaharoff and, for some 
reason, the aging munitioneer was interested. He got hold of the 
shares and, with the aid of the Prince, shouldered Blanc out of the 
place and became its master. The Casino was a natural money- 
maker. It called not for any special magic but merely for money and 
a thorough business administration. This Zaharoff supplied. He did 
not manage it himself. He put in his own men. And it paid him 
golden dividends. 

It was not altogether an unbecoming spot to end his strange 
career — this singular little nation of twenty thousand souls, living 
on a rock in the Mediterranean, a Prince ruling the tiny entity with 
his little army of a hundred and twenty men, a single business en- 
terprise, the Casino, paying all the bills, supporting most of the 
population. There they ruled, two old nabobs — one the civil despot, 
the other the economic despot, owning the economic fountain out of 
which all the taxes and wages of the place came; the Prince of 
Monaco and Sir Basil Zaharoff, twin rulers in a comic-opera state 
that lived by gambling. Zaharoff’s wise administration brought him 
rich profits, and when he had made enough and was weary of the 
business — and perhaps of all business — he sold out at a great profit. 

Meantime on September 22, 1924, in the little village of Arron- 
ville outside Paris, he and the Duchess of Villafranca, who had been 
his unwedded consort for nearly forty years, were married. And 



then eighteen months later, in 1926, his new wife, his affinity of 
forty years, died at Balincourt. And this was the end of Zaharoff . 
The tedious business of straightening out the affairs of Vickers 
had to be got through with. This was done the next year. 

After that Sir Basil Zaharoff continued to grow older, but did not 
die until 1936. There came a time when he grew feeble and had to 
be wheeled around Nice and Monte Carlo in a chair. What does such 
a man think, sitting feebly in a chair, pushed around like an infant, 
as he surveys the days of his power when he strode the earth like a 
titan, had his hand on the wires in the ministries of Europe, and 
felt a hundred hills shake in the roar of his cannon. Zaharoff s world 
was done, at least for the time being. The armament makers had 
proved, beyond all peradventure of doubt, the futility of their 
weapons and the folly of the regimes upon which they flourished. 
Their whole crazy world had come down in fragments around their 
ears. But then, after a brief interval of remorse and penitence, as 
the old gun man grew grayer and feebler, the dark industry he had 
helped to build got back its wind and its energy and grew bigger and 
mightier than ever. In the year that he died, the gun mills were 
grinding faster and more furiously than they were in 1913, the na- 
tions that had slaughtered each other with the guns of Zaharoff and 
company were preparing to repeat the crime with other and deadlier 

The munitions industry, of course, was and is nothing more than 
another way of making money. Its techniques differ only in that its 
direct customers are governments and its sales practices are adapted 
to that necessity. Its dark sins have been in the region of selling. 
But even in this, it has resembled many of those other industries 
that must find their clients among public officials. It used bribery 
of officers, penetration of cabinets and bureaus, intimacy with the 
powerful. All these weapons Zaharoff knew how to employ with con- 
summate skill. We find him on terms of intimate collaboration at 
one time or another with the most powerful men in the state — with 
Clemenceau in France and Lloyd George in Britain, with Briand, 
foreign minister, and, of course, with war and navy ministers every- 



where, with Venizelos in Greece and his opponent Skouloudis, with 
Bratianu in Rumania, where also we find him entertained by the 
Queen, who actually intercedes with him to assist the tottering 
throne of Greece upon which her daughter sits as consort. Such a 
man as Lord Sandhurst, Undersecretary of State for War in Eng- 
land, is trustee for Vickers bonds, and Arthur Balfour is trustee for 
the bonds of Vickers’ affiliate, Beardmore. In Paris, Zaharoff is a 
director of the Bank of France. 

It is this side of the munitions business that brings it into dis- 
favor. For it is not content to corrupt officials as public contractors 
do, but mixes up in state policy to create disturbance. It flourishes 
only in a world where hatreds and controversies, dynastic and eco- 
nomic and racial and religious differences between peoples flourish. 
Hence it has spared no pains to keep these mortal quarrels alive, 
to alarm peoples and ministers with war scares, to breed suspicion 
and distrust. First among all the practitioners of this dark art was 
Zaharoff. There is little doubt that he loved the game. He was the 
troublemaker feeding upon trouble — the neighborhood provocateur 
raised to the dubious dignity of free-lance statesman. Beaverbrook 
was right — “The destinies of nations were his sport; the movement 
of armies and the affairs of government his special delight. In the 
wake of war this mysterious figure moved over tortured Europe.” 

He cared nothing for acclaim, apparently, or if he did he realized 
it did not run well with his business. He did not advertise himself 
with magnificence like Morgan or Krupp; he did not go in for 
pageantry like William H. Vanderbilt or Fugger. He hired no shirt 
stuffers to blow up his fame like the Rothschilds and Rockefeller. 
But he did find it necessary to establish credentials of respectability 
and power. The name Zaharoff was passed around coated with 
odium in more than one critical period. And so he contrived at the 
proper moments to have put upon him the hallmark of govern- 
ments. In 1908 he was made a Knight of the Legion of Honor in 
France. In 1913 he was promoted to be an Officer of the Legion of 
Honor, having endowed a chair of aviation at the Sorbonne. The 
next year, at the very hour when Paris police were thrown about his 



house to guard him against the possible anger of the radical groups 
because of the assassination of Jaures and when his lifework was 
about to flower into the most murderous of all wars, he was raised 
to be a Commander of the Legion of Honor. Then in 1918, before 
the war ended, and doubtless to advance the ill-starred campaign 
he was organizing in Asia Minor, he was awarded the Grand Cross 
of the Order of the British Empire and became a Knight of the 
Bath — Sir Basil Zaharoff. A little later France again elevated him 
to the dignity of Grand Officer of the Legion. She was not done with 
her eminent citizen. In 1919 he was given the Grand Cross of the 
Legion, the highest decoration the republic had to offer. Thus, two 
crosses gleamed upon his breast — the cross of Britain and the cross 
of France — and, incidentally, the cross of Christ, the Prince of 
Peace, upon the bosom of this angel of war and blood. 

Benefactions, nicely placed, preceded these honors — a chair of 
French literature named for Marshal Foch at Oxford, a chair of 
English literature named for Marshal Haig at the Sorbonne. And, 
of course, Oxford made him a doctor of civil law, though his 
specialty was the highly uncivil law of war. He gave 200,000 francs 
to enable the French athletes to participate in the Antwerp Olym- 
pics, endowed the Prix de Balzac — a literary prize — established the 
Pasteur Institute in Athens, and put 25,000 pounds at the disposal 
of the clinic for poor children there, provided a becoming Greek- 
legation building in Paris, and showed some other evidences of an 
interest in his native Greece. These benefactions need not be exag- 
gerated. A twenty-five-thousand-pound contribution by a man into 
whose pockets countless millions are rolling is no more than a dollar 
bill that the ordinary Christian tosses into the plate on Sunday or 
the ten-dollar donation to the Salvation Army at Christmas. The 
good Sir Basil never pinched himself or denied himself anything to 
aid any cause. On the contrary, most of his gifts were investments in 
good will when good will was sorely needed. 

Interlogue Three 



One cannot speak of Krupp before the Great War without think- 
ing of Hugo Stinnes after the war. For one brief, dizzy moment 
Stinnes was, perhaps, and in a sense, the richest man in the world. 
In the hot cauldron of inflation the modern ideal of liquidity 
reached its craziest perfection — liquidity of ownership, the owner- 
ship of everything in Germany reduced to complete fluidity, run- 
ning like a turbulent wild river through the markets. The ownership 
of office buildings, hotels, apartments changed hands half a dozen 
times a day like wildcat shares on an exchange. In that amazing 
epilogue of war, Stinnes, in a delirium of acquisitiveness, poured 
into his holding companies banks and factories, railroads and 
power plants, mines and oil companies, steamships, hotels, building 
blocks, estates by the hundreds. Germans, taught by their war- 
makers to adore the colossal, opened their eyes and looked with 
awe at this supercolossal industrial miracle. German business 
seemed to be divided into two parts — one part belonging to Stinnes, 
the other distributed among the other millions of Germans. 

The vast extent of his possessions in Germany may be imagined 
from a simple list of some of the odds and ends that dropped into 
his bag outside Germany as a sort of by-product of his internal 
acquisitions. He found himself in 1923 controlling 20 coal com- 
panies, 11 iron mines, four oil fields and refineries, 16 earthen, 
stone, and ceramic works, 29 smelting works, 20 metal, machine, 
wagon, and locomotive works, three telegraph companies, four 
shipyards, 80 electric plants, eight paper, chemical, and sugar 




plants, four shoe factories, 47 electric and gas plants, nine shipping 
companies, 14 newspapers and print works, three cotton and coco- 
nut plantations, ten banks and holding companies, 204 selling 

For all this, his fortune, vast for an instant and sensational, 
possessed no lasting importance. What it was worth is difficult to 
say. Had the whole tangle of steel and copper mines and mills, 
factories, banks, hotels, stores, buildings been reduced to marks — 
billions of billions of marks — and converted into the currency of 
America or England, they would have fetched just about enough 
pennies to buy an evening’s bus ride. The whole thing represented 
a tumescent boiling up of the blood of German industry in a fever 
of inflation, in the course of which this monstrous growth broke 
out. It was part of the nightmare of buying when everybody in 
Germany was running around frantically trying to get rid of their 
money as if it were a plague. Stinnes understood the crazy game 
better than others, but not well enough to see it through to the end. 
He was like a gambler sitting at a table piling up before him 
mountains of chips which were good for cash in a casino which was 
bankrupt and on fire in the midst of an earthquake. He began his 
mad game toward the end of the war. In five years he was dead, 
and his weird empire was scattered. 

Hugo Stinnes, however, must not be dismissed as a mere gambler. 
He was a leading businessman of prewar Germany. His grand- 
father, Matthis Stinnes, made a fortune in shipping and coal. 
Hugo Stinnes was born in 1870, as Bismarck prepared to incite 
the Franco-Prussian War. At twenty-two he formed his own firm 
but also took a part in managing the family mining interests. His 
own business grew enormously, until by 1914 it comprised coal 
and iron mines, steel mills, railroads, ships, shipbuilding, banking, 
trading companies. He loomed large in the Ruhr. 

He was the leading exponent of vertical combination in Ger- 
many. The German pattern of combination was horizontal, be- 
ginning with cartels as early as the days of Jacob Fugger. Stinnes 
was fascinated by the vertical type in which all the stages of pro- 



duction and even distribution, from the raw materials to the fin- 
ished product, are brought under a central control. In America 
this had gone far— Carnegie and later Gary and Gates and still 
later Morgan brought it to full flower in the United States Steel 
Corporation. The war suddenly gave a swift boost to this type of 
combination, and Stinnes began to avail himself of the permissions 
and opportunities of the war. Owning steel and coal industries, he 
needed lumber for the mine pits. Hence he acquired forests. Having 
forests for lumber he could use it to make paper. Having paper he 
could use it in printing plants. Having printing plants he could 
publish newspapers. And so the endless chain of acquisition went 
in every conceivable direction. He helped plan the war manage- 
ment of Belgian industry. He spread his control into Belgium and 
Luxembourg. He took a leading part in the direction of Ruhr 
industries and used that position to his advantage. He was expand- 
ing all through the war. 

His method was to acquire mere minority rights in companies. 
He banked on his personal force to make that dominant. Not tall, 
but thick-set, erect, heavy-featured, with close-cropped hair, well- 
trimmed beard, yellow complexion, eyes oblique but shifting and 
yet penetrating, cool, a calculating machine, talking but little and 
then in a weary whisper, he nevertheless radiated that mysterious 
personal force which reduced other men to obedience. 

When the war ended and his Belgian and many other semiwar 
possessions were confiscated, his companies were compensated by 
the German government, putting him into possession of large 
amounts of cash. Then, as the inflation got under way, he could, 
through his own banks and credit agencies, borrow marks to buy 
shares, which marks he could repay in a few weeks with greatly 
depreciated currency. And as this process went on Stinnes, coolly 
calculating the chances, the velocity of inflation, the human ele- 
ments at work, borrowed and bought and paid his credits until he 
seemed to be swallowing all Germany, and the whole world looked 
daily at the mounting expansion of his interests. He seemed to be 
getting everything — chemical plants, lighting plants, explosives, 



cellulose, newspapers, publishing houses, brass and copper mills, 
automobile factories, film companies, shipping lines, big banks, 
banks with branches all over Germany, mortgage companies, in- 
surance companies, companies of all sorts in Russia, Austria, 
Czechoslovakia, Poland, Rumania, Switzerland, South America. 
A cyclone seemed to be sweeping everything in Germany into his 
hands. Then came the stabilization of the mark. All the tremendous 
forces that had been driving everything his way suddenly ceased. 
And Stinnes, too. Only fifty-five, he seemed to cease with the 
storm. He died on April xo, 1924. His two sons quarreled over 
the unmanageable loot. They were utterly unequal to the task, 
and so, in all likelihood, was Stinnes himself. In 1925 the whole 
thing broke down. When the brothers and other parties interested 
finished there was left a few coal mines, two iron- and steelworks, 
four metal-trading firms, four shipping companies, and a few mis- 
cellaneous items. 



Those fabulous fortunes of the great feudal princes of the East 
naturally invite the imagination of those who are interested in the 
subject of wealth accumulations. And the same observation goes 
for the great land fortunes of England, many of which still exist. 

It cannot be said that they are without economic significance, 
since they perhaps control the economic life of the regions where 
they exist. But they are certainly without significance for us here. 
They are no part of the pattern of the modern world. They hang 
on as a remnant of a world that is dead in most places and dying 
everywhere. Not only do they belong to the type of fortune of the 
Middle Ages but a few of them are actually those very fortunes. 
They are either feudal or semifeudal, and there is no essential 
difference between them whether they be found on the banks of 



the Ganges or Sweet Avon. Essentially they involve the ownership 
of the land as the indispensable condition of controlling the product 
of the dweller upon it. In earlier times or in more backward 
countries their ownership of the land was accompanied by political 
rights of the most despotic character over the lives and bodies of 
the tenants. In more modern and civilized areas these political 
rights have been either greatly reduced or wholly extinguished. 

One hears of those storybook or cinemalike Indian maharajas 
who are invariably represented as possessing fabulous stores of 
gold and precious stones and sources of income that are mysterious 
but abundant. First of all, there is a good deal of exaggeration 
about them all, a very considerable lack of precise information. 
But aside from that, they are anachronisms in the world’s economy. 

Most often reported among these Oriental princes and unfail- 
ingly described as the richest man in the world is the Nizam of 
Hyderabad. Hyderabad is an Indian state about the size of Idaho, 
with a population of about 12,500,000, and lying on the boundaries 
of Madras and Bombay. The Nizam is the principal Mohammedan 
ruler of India, and the state itself has a lot of good agricultural 
land, and some coal, copper, iron, diamonds, and gold. But none of 
these resources has been very vigorously worked. Doubtless the 
Nizam enjoys an immense income. But we are asked to believe that 
he has $500,000,000 of gold stored away in a strong room, part 
of his personal fortune, and another $2 ,000,000,000 in jewels. 

This is a huge amount of gold in a country that operates on the 
silver standard, and, of course, it is gross exaggeration. But exag- 
gerations pursue one remorselessly through the mazes of Indian 
fortunes. One hears about Akbar, first of the Great Moguls in the 
sixteenth century, who had an income of $200,000,000 a year and 
who on festival days weighed himself against gold coins and gave 
his weight in gold to the poor. Then there was Shah Jahan who 
built the Taj Mahal, whose peacock throne cost $32,000,000, and 
who enjoyed an income from his land alone of $22,000,000. But 
neither raked in so rich an income as the later Mogul Aurangzeb 
who collected $385,000,000 a year. These utterly fictitious sta- 



tistics, so general when dealing with Indian fortunes, leave one 
quite lost as to the facts, which, of course, do not remotely approxi- 
mate these figures. 

The English land fortunes, of course, are for the most part 
almost wholly hereditary fortunes running back over periods of 
varying length. Few if any of them extend back to the Middle Ages. 
In 191 1 when a new Domesday Book was compiled, but one landed 
estate turned up which had been included in the original Domesday 
Book compiled in 1086. It was a small estate of 2000 acres in 
Somerset that had cost eleven pounds in the eleventh century and 
was valued at 27,000 pounds in 1911, with an income of 1400 
pounds. It remained in 1911 in the name of the same family that 
had owned it in the year 1086. 

As a matter of interest I need but mention a few of the larger 
estates that remained intact in 1883. I give below thirteen of the 



Norfolk, Duke of 


Bute, Marquis 


Northumberland, Duke of 


Ramsden, Sir J. W. 


Derby, Earl of 


Devonshire, Duke of 


Bedford, Duke of 


Tredegar, Lord 


Calthorpe, Lord 


Dudley, Earl of 


Haldon, Lord 


Anglesey, Marquis of 


Cleveland, Duke of 


The largest in area was that of the Duke of Northumberland, 
which embraced 191,480 acres. The largest rent-roll, however, was 
that of the Duke of Norfolk who then collected 269,698 pounds a 
year from his tenants, though he had far fewer acres. But some of 
them were located in the choice districts of London. 

Some of these estates embrace a good deal of worthless lands; 


37 $ 

others include whole towns and valuable timber and mineral rights. 
But they are not characteristic of the existing economic system 
and under the impact of income and inheritance taxes are being 
very seriously reduced and in some cases broken up. 



The dream of the rich man, particularly the parvenu of other 
days, as soon as he looks about him and surveys his glory, is to 
perpetuate it in a dynasty. This was not so difficult in the feudal 
era when wealth rested upon the indestructible land and men could 
entail their fortunes through the practice of primogeniture. But 
when the laws against entails were passed, the days of the dynast 
became somewhat more difficult. Nevertheless, aristocratic families 
in England and Germany and Spain and other Continental coun- 
tries have found ways of transmitting their wealth from one gen- 
eration to another with a good deal of success. 

But in America, where the land has got pretty generally dis- 
tributed, where fortunes are invested rather in industrial and 
commercial enterprises, the fear of the dynast has been much 
diluted. One of the oldest fortunes is that of John Jacob Astor. Its 
founder died in 1825, leaving $25,000,000. When his son died in 
1890 there were a hundred millions to divide. This went to two 
sons — $50,000,000 to each. It grew in their hands. One left $150,- 
000,000, the other $75,000,000. The owner of the $150,000,000 
took himself off to England where whatever of dynastic energy is 
left is a rash upon England’s limbs, not ours. The brother with 
the $75,000,000 died in America leaving his fortune among numer- 
ous heirs. The bulk of the American Astor fortune is in the hands 
of William Vincent Astor — $87,000,000. There are a few stray 
millions scattered about, but it is far under the $250,000,000 it was 
twenty years ago. And it continues to wane under certain new 



pressures while its owners have ceased to be dominating factors 
in any important business. 

These pressures are several. They are the logical development 
of the whole system. One of them is the inheritance tax. New social 
philosophies are now powerful. But state necessities are even more 
imperative. Governments need so much taxes that ways have to be 
found to get them. The inheritance tax is the one that generates 
the least effective resistance. During life, income taxes now weaken 
the power of the fortune to accumulate, and, at death, the govern- 
ment steps in to take the lion’s share. 

The Vanderbilt fortune is one in point. Until his death old 
Commodore Vanderbilt strode the country like a colossus with his 
hundred million. His son William H. made it two hundred millions. 
He owned the New York Central Railroad as a man owns his corner 
store. But he found it wasn’t healthy for one man to control a great 
railroad. He found it to his advantage to sell a lot of his control. 
When he died he left eight children. Eight children subject a fortune 
to a very enfeebling division. But his sons, Cornelius and William 
K. got $50,000,000 each. Cornelius’ fortune at his death went to 
several children, but Alfred got the bulk, $80,000,000. When he 
died it had shrunk to $35,000,000. It was split $5,000,000 to his 
son William, $8,000,000 to the widow, and the balance to two sons 
of his second wife. William K. left $100,000,000. It went to two 
children, Consuelo and William Harold. The former withdrew her 
fortune to a ducal dynasty in England. Among the various heirs, a 
good slice drifted into the hands of Frederick W. Vanderbilt. He 
died in June, 1938. His estate, valued at $72,588,000, was liqui- 
dated in 1939, and the Federal government and state of New York 
took $41 ,2 72,000 of it in taxes. 

Andrew Carnegie was worth at one time $300,000,000. He gave 
away most of it to the Carnegie Corporation for libraries and edu- 
cation. When he died his estate showed $23,000,000 left. His part- 
ner, Henry Clay Frick, left an estate valued at $150,000,000. 
$117,000,000 went to public benefactions. His children got $25,- 



000,000, and this was subject to heavy inheritance taxes that re- 
duced it by forty per cent. 

The Gould fortune was a great bolus of wealth. When Jay Gould 
died it had swollen to about a hundred million. He tried to entail 
his estate with a trust for his son, George J. When George died 
after many financial disasters he left $30,000,000 in another trust, 
but much split up: $10,000,000 in trust for seven children by his 
first wife, $4,000,000 for the three children of his second wife, and 
the balance in trust for both broods. 

Even in England many noble gentlemen with immense estates 
have found them too costly to keep up after the income-tax gath- 
erer had got through with them, and the inheritance-tax office has 
been doing its deadly work upon what is left. 

The Mitsui fortune has endured because of the peculiar social 
system under which it exists. It has been possible to organize a 
family there with sanctions behind its decrees that would not be 
possible in America, France, or England, or, for that matter, in 
any large modern state. Then, by separating the family organi- 
zation and the business organization and putting the business into 
the corporate form, the whole structure has been given a quality of 

But the very corporate form that has served the Mitsuis so well 
is actually tending to break up family control of business in this 
country. The corporate form makes it possible for men to dis- 
tribute their investments over a wide range of industries. Modern 
investment studies have convinced owners of immense fortunes that 
the greatest safety lies in diversification rather than control of an 
industry. Therefore the fortunes of very wealthy men will be found 
spread around in the stocks and bonds of scores, and in some cases 
of hundreds, of corporations. The result is that they hold a dom- 
inating interest in none and exercise over industrial policies, save 
in a few cases, but very little influence. 

A third element now enters. The uncertainties of the world, the 
wars, depressions, and political irritations, have induced many men 



to take refuge in government bonds. They do this for another 
reason — to escape the income taxes. All these influences tend first 
to minimize the power of dynastic families over the industries 
founded by their ancestors and second to break up those fortunes, 
first through income and inheritance taxes, second through family 
distributions, and third through the erosion of the last dozen years. 

If we will go back one hundred years we will find that the largest 
fortunes in America were the following: 

John Jacob Astor 


Stephen Van Rensselaer 


Stephen Girard 


Peter C. Brooks 


William B. Astor 


Amos and Abbot Lawrence 


Peter G. Stuyvesant 


James Lennox 


Peter Schermerhorn 


John P. Cushing 


William B. Crosby 


Isaac Bronson 


Thomas H. Perkins 


John Bolen 


Henry Brevoort 


Gouverneur Morris 

1 ,000,000 

John Mason 


Jonathan Hunt 


Samuel Appleton 


Robert G. Shaw 


Some of these, of course, are merely good guesses at the fortunes 
of these men, but they serve to show us how few are left today. 
There were a few others whose fortunes cannot be even guessed at 
— David Sears, millionaire stockholder; Jacob Little, security 
speculator; August Belmont, representative of the Rothschilds. 

In the world of today the way of the dynast is a hard one. 

Brown Brothers 

Mark Hanna 

Mark Hanna 



Mark Hanna was bom in the same year as J. Pierpont Morgan 
and two years before John D. Rockefeller. The shadows of these 
men, merged into one monstrous silhouette, brooded over the 
American scene for more than half a century. As Morgan dom- 
inated the financial life of the nation and Rockefeller gave direction 
to its industrial life, Hanna became the molder of those political 
forms proper to the age of Big Business. 

The political control that took its rise with the rise of these men 
came to a pause — a dark, disordered, and even terrifying pause — 
in 1933. Hanna’s assumption of national boss-ship in 1896 con- 
stituted a kind of initial invasion, in which big business broke into 
the government. The businessman in politics was, of course, always 
a familiar figure. If there were Carnegies and Fricks and Elkins 
and Keans and Blisses in the Republican Party, there were no lack 
of Belmonts and Whitneys and Paynes among their Democratic 
opponents. But up to the time of McKinley these businessmen 
were applicants at the hands of the politicians. Rich men might 
seek juicy favors from the state, but always they were supposed to 
send someone a check. 

From the day of the United States Bank down to the wholesale 
traffic in congressmen by Oakes Ames and the Credit Mobilier, 
businessmen had bought Senators and congressmen, legislators 
and aldermen. The technique that governed the relations of busi- 
nessman and politician was that of corruption, bribery, and flattery. 
Always there have been statesmen like Disraeli in England and 




McKinley in America who knew how to varnish over the accept- 
ance of benefices at the hands of some rich Maecenas. Thus these 
bankers and industrialists exercised great influence in the state, but 
they did not master it. There had been plenty of Albert B. Falls 
but no Andrew Mellons. Of course the businessman in politics was 
not new. There have been businessmen holding positions of power 
since Nicias in Athens and Crassus in Rome. It went farther in 
England than anywhere. She had had the rich textile manufacturer, 
Sir Robert Peel, as premier, and Cobbett had referred with scorn 
to the large number of seats in Parliament purchased by county 
bankers. But it had not proceeded to that point in America. 

With the advent of Mark Hanna came a change. Grover Cleve- 
land’s first Cabinet contained Thomas F. Bayard, a great Senator, 
as Secretary of State; Lucius Q. C. Lamar, a professor of mathe- 
matics and economics, as Secretary of the Interior; William Crown- 
inshield Endicott, a justice of the Massachusetts Supreme Court, 
as Secretary of War; William F. Vilas, a professor of law, as Post- 
master General; Augustus H. Garland, a statesman or politician 
rather than corporation lawyer, as Attorney General; John G. 
Carlisle, former Speaker of the House, as Secretary of the Treas- 
ury. William C. Whitney, millionaire lawyer and agent of powerful 
New York banking and utility interests, in the Navy Department, 
was a solitary exception. 

McKinley’s first Cabinet, on the other hand, included Russell 
A. Alger, an enormously wealthy lumberman; Lyman J. Gage, 
president of the First National Bank of Chicago; James A. Gary, 
a rich textile manufacturer; and Cornelius N. Bliss, New York 
banker. Wealthy manufacturers and merchants and rentiers were 
slowly to replace in the Senate, the Cabinet, and diplomatic service, 
and finally in the presidency itself, the professional politicians. 
And this was to go on until, on March 4, 1929, as this confused era 
moved into its latest stage, a millionaire businessman President, 
surrounded by a Cabinet of millionaire businessmen, took over 
immediately and directly the reins of the government,' with a com- 
mercial banker at the Court of St. James, an investment banker in 



Italy, a utility magnate in Berlin, an advertising man in Paris, a 
steelmaker in Spain, and millionaire businessmen in almost all the 
capitals of the world. 

The process was completed when in October, 1929, we heard 
Gabriel over Wall Street and the President, as that fateful pre- 
monitory shiver ran through our economic structure, summoned 
around him the College of Captains. At that moment, every phase 
of our life was in the hands of businessmen. The test for their 
power was at hand and, led by a great engineer and great industrial 
ministers of state, these bankers and manufacturers and utility 
magnates were to seize the depression in its infancy and crush it. 
In that hour the Great God Business might be said to have become 
supreme, even though the very earth shook under the images of 
the idol. 

It was Herbert Hoover’s melancholy destiny to be the last in- 
heritor of the scepter that Mark Hanna forged. For it was this 
wholesale grocer and iron and coal merchant, street-railway baron 
and banker of Cleveland, who was the first masterful instrument of 
usurpation by business, self-righteous and unquestioning, with 
ample cash and a profound respect for its power to keep the 
cinders pouring from the smokestacks of God and the seats of the 
mighty filled with men who could understand a smokestack. He 
drifted into politics in almost the same way business drifted into 
politics. And he became almost overnight the very symbol of big 
business ruling the government. The cartoonist, Davenport, seized 
upon his countenance and figure, decked him out in dollar-marked 
plaids and made him the type of the lawless baron crushing the 
lowly. But if Davenport had not done this, some other artist would 
have adopted that round, lusty face, with its strong jaws and low 
gable and the whole strong, portly figure. And to this day the 
caricaturist, aiming a shot at arrogant and despotic business, will, 
almost without realizing it, move his pencil into the lines of Daven- 
port’s devastating cartoon. 

Hanna moved into power at the moment when big business put 
to work for its own purposes the cherished doctrine of individ- 



ualism. Certain aggressive men had begun to expand their power 
out of all proportion to their natural endowment. They learned how 
to arm themselves with machines, to absorb the combined resources 
of many individuals through the corporate form, and thus to be- 
come, beside their lesser rivals, almost monstrous beings. Few men 
could hope to assume such armaments. But there were plenty of 
pious and complacent statesmen like the McKinleys and Hays and 
Roots to remind the people who cried out against these half-under- 
stood giants that any attempt to disarm the monsters would be a 
blow at the hardy cult of individualism. It was a merry invention 
to which Hanna gave his fullest assent. As the years wore on even 
many conservative observers of the swelling spectacle of big busi- 
ness began to see there was something askew in this notion of 
individualism, until Herbert Hoover arrived on the scene, and with 
the authority of the presidency behind him, invoked once more 
this discarded fetish and blessed it with the name of Rugged. The 
journals of apology took it up eagerly and proceeded to explain to 
little Jack that the Giant was an individual just like himself — 
though perhaps a trifle more rugged. 

In every age the rich businessman has had a collection of 
weapons or tools with which to work. From earliest times men 
had been fashioning these tools. They got down to serious business 
in the development of this arsenal in the days of the Florentine 
bankers and the Augsburg merchants. In the chapter on Robert 
Owen we saw that as early as 1837 most of the weapons of that 
thing called “finance capitalism,” for want of a better name, had 
been in use at least in rudimentary forms in Boston and Lowell. 
But now they were far more clearly understood by some men. 
Men like Rockefeller and Morgan could not use those weapons 
fully and freely save by friendly collaboration with the state, by 
legal authorizations, and by the creation of a benevolent legal and 
public mood upon which they could float safely. Hanna it was, more 
than anyone, who organized the political shell within which this 
new capitalism could function safely. And this he was able to do 
because he had first made himself rich and then, through the leisure 



that fortune gave him, dedicated his large abilities to political life. 

Hanna held fast to the theory of prosperity by percolation. That, 
of course, was no new conception. The feudal lord enabled the 
elements of his strength to sift down to his vassals and their villeins. 
The Southern slave owner believed he was the divinely appointed 
wide end of the funnel through which blessings flowed down to his 
Negro hands, just as the haughty coal baron, George Baer, believed 
that God appointed the anthracite mine owners as the generators of 
the favors that dripped down upon the half -starved coal miners of 
Pennsylvania. Had Hanna been President when the depression 
arrived he would have convoked the College of Captains; he would 
have summoned the employers to be good to their workers and not 
to cut wages; he would have organized the Reconstruction Finance 
Corporation; and as the structure continued to crumble despite all 
these braces built around the roof, he would have wondered what 
evil and mysterious mischance defeated all these perfectly obvious 
and wise measures. 


Mark Hanna was born September 24, 1837, * n New Lisbon, 
Ohio. At the time, his grandfather, Robert Hanna, with his tall, 
industrious sons, were the rich men of New Lisbon, where they 
ruled a wholesale and retail grocery business. It was a strong breed 
— Virginia Hicksite Quakers and Vermont Presbyterians — bent on 
getting along, worshiping law, hating slavery, liquor, and disorder, 
keeping out of public affairs, minding strictly their own business. 

Mark Hanna’s education was of the most immature sort. As a 
lusty, rosy-cheeked boy he attended the public grammar school in 
the basement of the Presbyterian Church in New Lisbon. When 
the family moved to Cleveland he attended grammar school and 
then the Central High, where John D. Rockefeller was one of his 
classmates. Neither shone at school. Hanna, in particular, was 
twenty years old before he struggled to the end of the simple course 
of Central High with boys two to four years his junior. Then he 



went to Western Reserve College, only to be ejected after a few 
months for some harmless prank. After this he obeyed his own 
desires and put on a pair of overalls as a roustabout on the River 
Street docks in his father’s prosperous grocery business. 

After a brief novitiate as a roustabout, Hanna moved up to a 
clerkship in the grocery business of Hanna, Garretson & Com- 
pany, then as a purser on one of its lake steamers, then as a trav- 
eling salesman, and then as a part of the general management of 
the enterprise. The world of affairs in Cleveland first became aware 
of this robust youth when in his twenties he became a familiar 
figure in River Street — a stocky, thick-chested, large-shouldered, 
virile young man, with huge, alert brown eyes and a heavy bush 
of matted beard along the edges of his powerful jaw. The upper 
lip was clean-shaven after the manner of the time. 

When the war came, like the Rockefellers and Morgans and 
Wanamakers and other sensible businessmen of the time, he knew 
the Union was safe as long as the supply of common labor held out 
for drafting. At the close of the war he was drafted into service for 
a few brief months as a second lieutenant to help repel General 
Jubal Early’s raid upon the Capital. It must be said for him, how- 
ever, that after the war he did not join the G.A.R. and exhibit him- 
self at campfires until near the end of his life, when the pressure of 
politics and the power of the American Legion of that day forced 
him in. 

The remainder of his business career is soon told. From the 
grocery business he went into oil and then into the development of 
steamships on the lake. Then he married the daughter of Daniel 
Rhodes, a pioneer in coal and iron business on the Lakes. Soon 
after he was in his father-in-law’s firm, and when the old man died 
Hanna dominated it and changed its name to M. A. Hanna & Com- 
pany, with his brothers as partners. They became large miners and 
dealers in coal, iron ore, and pig iron, owners of a fleet of steamers, 
and finally builders of ships. Thus he amassed a fortune and when 
he died left an estate valued at seven million dollars. 

There were two interesting features in his business career. One 



was the variety of his interests. Unlike Rockefeller, who stuck 
with dogged singleness of purpose to his last, Hanna had to have 
his irons in many fires. He bought and ran a newspaper, owned a 
theater, organized and headed a bank, and became one of the two 
leading street-railway magnates of Cleveland. The other point of 
interest lay in this little-considered fact: while he was regarded as 
the representative of big business and great corporations, Hanna 
himself did not commit his own fortunes to the corporate form. His 
business was and remained until after his death a partnership. And 
while it grew and spread to many allied lines — ships and railroads 
and coke and blast furnaces — some of which were actually incor- 
porated, they were old-fashioned corporations, closely held, really 
incorporated partnerships. Hanna, like Rockefeller, and unlike 
Morgan and Rogers and Gould and many other contemporaries, 
never used other people’s money. He was a builder and developer — 
a sound and able businessman, who accumulated a large fortune 
and ended by losing interest altogether in acquiring any more. 


In 1896 after McKinley’s nomination, when the convention rose 
and called for Hanna, the “kingmaker,” and the thick-chested, 
rugged, smiling Clevelander mounted the platform, the newspapers 
hailed him as a newcomer in politics and as the businessman who 
had turned boss and routed the veterans Platt and Quay and Reed. 
The dramatization pleased the press, but Hanna was no tyro. He 
was a political leader at least as experienced as any man in the 

He began his career as a businessman. Until he was forty he 
took little active interest in politics. As it fell out, in the middle 
’seventies an important phenomenon was shaping itself in Ameri- 
can political life, the effects of which survive to this day. The party 
of Lincoln, fresh from the exalted evangel against human slavery, 
was being made into the party of that new thing, Big Business. 
This was the work of chance. The war had made the Republican 



party supreme in the North. Big Business was stretching out and 
challenging all sorts of old-fashioned rights. The railroads were in 
continual collusion with state governments. Oil, sugar, iron, coal 


corporations were moving ruthlessly back and forth across state 
frontiers. Gas companies and street-railway corporations had to 
appeal to city governments for the use of the streets. All the busi- 
nessmen behind these enterprises, like practical managers, made 
their peace with the political party that was in power. And this 
chanced to be the Republican party. When the Democratic party 
returned to power in the South and some of the great cities of the 
East, the same elements could be found collaborating with their 
Democratic allies. Hanna’s own interest in politics had been for 
years quite casual. He could be found around the polls on Election 
Day and at ward meetings with the “better element,” throwing his 
weight on the side of “good government.” 

It was not until 1878 that he found a good personal business 
reason for moving actively in politics. At this time business and 
politics were two separate estates. Their edges touched. Some mem- 
bers in each estate flowed freely over the other’s boundaries and 
sometimes it was a little difficult to tell whether this one was a 
businessman in politics or a politician in business. One of the best- 
known highways between these two states of business and politics 
was the little old-fashioned horsecar railway. And it was on this 
line that Mark Hanna rode finally into the world of the politicians. 

Hanna’s father-in-law, Daniel Rhodes, was part owner of a little 
fifteen-mile horsecar line in Cleveland that ran over the viaduct to 
the Public Square. It was managed by Rhodes’ partner, Elias Sims, 
a hard-bitten old steamboatman, who was president of the com- 
pany. Of course, old Elias Sims quarreled continually with the city 
authorities. Aldermen had learned early how to grant competing 
franchises to political friends to be sold out to the existing roads. 
Of course, old Sims had to keep cn rapport with the Cleveland 
fathers. “All councilmen want,” he complained, “is money. Have to 
go round with my pocketbook in my hand all the time.” 

When Daniel Rhodes died in 1875, Hanna assumed the manage- 



ment of his wife’s interests. And immediately his interest in politics 
bristled. But it was not until 1879 that he became a director of the 
road and collaborated directly with Sims in its management. 

Immediately Hanna confronted a new figure rising in Cleveland 
— a figure destined to make a generous contribution to the gaiety 
of the city. This was Tom L. Johnson. Johnson had begun almost 
as a youth with a single horsecar and had built up a prosperous 
streetcar line. He and Sims were in continual warfare. And Hanna 
was quickly drawn in. Between Hanna and Johnson there was an 
impassable gulf. Johnson was a huge, portly but powerful, dy- 
namic, generous-minded man, quite as full of combat as Hanna. 
Both started in business and ended in politics. But Hanna was 
always the businessman in politics; Johnson, the politician in 
business. Hanna was profoundly satisfied with the world as he 
found it. Johnson was no less profoundly dissatisfied. Johnson 
became the leader in Cleveland’s street railways. But in the midst 
of his success, a copy of Henry George’s Progress and Poverty fell 
into his hands. When he had read it he rose up as completely con- 
verted as Saul of Tarsus. Henceforth he became a valiant warrior 
for George’s single-tax theory and for other popular reforms in 
government. In the end he sold out his railway interests, went to 
Congress, became Mayor of Cleveland, and achieved fame by his 
celebrated crusade for municipal ownership and the three-cent 

He soon came to embody the spirit of revolt against control by 
the corrupt utility interests, while Mark Hanna became no less the 
symbol of that control. These two men fought for over two decades 
in Cleveland and Ohio. And this long warfare began as Hanna 
joined Sims in the direction of the little horsecar line. Johnson and 
Sims went through one of their numerous battles over a franchise. 
Johnson won and Hanna, who hated defeat, was furious. He hur- 
ried to old Sims and, glowering at him with his huge brown eyes 
and shaking his long chin whiskers, demanded that Sims buy him 
out or sell. Sims sold and Hanna became sole ruler of tire little line. 

Before long Hanna found himself facing the pushing Johnson in 



another fight. The river cut Cleveland in two sections. Johnson’s 
line ran on one side of the river. He proposed to acquire a line on 
the other side, unite the two, and give a continuous ride across 
town for a nickel. He needed a new franchise for this, and before 
the council he found Hanna bitterly contesting the plan. All his 
life Mark Hanna stood against any cuts in the revenues of business. 
Years later his first battle in the Senate was to protect the steel 
trust’s efforts to squeeze an extortionate price out of the govern- 
ment for armor plate. This Hanna-Johnson fight waxed hot. At 
every session of the council, the squat, square-shouldered, burly 
figure of the coal, iron, banker, and utility magnate could be seen 
in the chamber, buttonholing members, hammering his cane on 
the floor, expostulating violently with them. Two days before the 
final vote Johnson got a summons from old Elias Sims to visit him. 
Sims told Johnson he controlled two votes in the council and that 
these would be delivered to Johnson. “Why?” asked the astonished 
Johnson. “It takes mor’n a fool to beat Hanna,” muttered Sims. 
“If you beat Hanna nobody can say any damned fool can beat 
Sims. You beat me. I want you to beat Hanna.” With Sims’ two 
votes Johnson did beat Hanna with but a single vote to spare. 

Hanna denounced Johnson’s plan to give “two rides” for a 
single fare. The service would cost five cents. The line would run 
at a loss. As it turned out the new line proved Johnson’s most 
prosperous venture. 

But Hanna could beat Johnson too. These two men rose to riches, 
electrified their lines, built them into powerful properties. Con- 
solidation followed consolidation until two companies dominated 
the city — the Big Consolidated (Johnson’s line) and the Little 
Consolidated (Hanna’s line). Finally the two lines merged and 
Johnson sold out. Hanna hated Johnson. He hated everything the 
man stood for. He would grow red in the face and pound his stick 
as he denounced him as a radical, a Socialist, a destroyer of society. 

As Mayor, Johnson attempted to run trolleys for three cents a 
ride. To Hanna this was hardly less than treason. Johnson forced 
the council to grant the necessary franchises to the city. Hanna 



promptly induced the attorney-general, Joseph Sheets, to bring an 
action declaring the city government of Cleveland unconstitutional. 
This was the same Joseph Sheets who later would dismiss the in- 
junctions against the Standard Oil Company. The court sustained 
Hanna’s contention. City governments all over Ohio were thrown 
into confusion by the decision. The governor called a special session 
of the legislature to reconstruct municipal governments. Hanna 
went to Columbus to sponsor a bill to permit granting perpetual 
franchises to his own company. The legislature adopted the new 
city government code but Hanna’s perpetual franchise was a little 
too much even for that corporation-controlled body to swallow. 

These battles raged for years. Cleveland belonged to its iron, 
oil, gas, electric, and streetcar interests, its banks and real-estate 
promoters, and Hanna became their recognized spokesman. They 
began to look to him to defend them. Thus led into politics by his 
railway company, he came to like it. He was a man of restless 
energy and loved combat and power. His own business was soundly 
organized and prosperous and he found he could take more and 
more time for his excursions into political strife. By the late 
’eighties he was a familiar figure in Cleveland, with his round ruddy 
face, his long narrow beard streaming down over his chin, his portly 
body, his heavy square shoulders, his flat-topped bowler hat. His 
fellow citizens saw him driving along Euclid Avenue, sitting in his 
private box at his own theater, moving about the neighborhood of 
the Public Square, stopping to converse vigorously, often angrily, 
with acquaintances, pounding his stick on the pavement. Though 
only a local celebrity he was a figure of importance and power. 


Hanna will always be remembered as the man who made McKin- 
ley President. Hanna’s ambition to be a President-maker had been 
formed before he became intimate with McKinley. He had, in fact, 
first come to know the latter when he was engaged, a dozen years 
before, in an effort to make John Sherman the Republican nominee 



for President. Hanna was named one of Ohio’s big four in 1884. 

It was at the convention of 1884 that he first found himself in 
contact with McKinley and Foraker, who were also delegates-at- 
large. Hanna supported Sherman, but Foraker and McKinley 
threw their strength to Blaine, who was nominated. Thereafter 
Hanna maintained friendly relations with both men but saw little 
of McKinley, then in Congress. In the next Republican convention 
Hanna took the lead as the campaign manager for old Senator John 
Sherman, who was thought to have a fighting chance for the presi- 
dency. The Ohio delegation was pledged to Sherman. McKinley 
was then a commanding figure in Congress; Foraker was the dash- 
ing Governor of Ohio. And in this convention Hanna formed his 
devoted friendship with McKinley and began his lifelong feud with 

McKinley’s name first came into notice as a presidential can- 
didate in that 1888 convention. Hanna, convinced that Sherman’s 
star had set, decided to switch to McKinley because, as he told a 
friend, he “was going to stop riding the wrong horse.” His real 
friendship for McKinley came after he had settled on that gentle- 
man as his next entry for the presidency. 

These three men — Hanna, McKinley, Foraker — formed a strik- 
ing group. Each was to rise as a presidential possibility. Each rep- 
resented a wholly different type in American politics. If we add 
to the group William Jennings Bryan, Theodore Roosevelt, and 
Matthew Stanley Quay, we have a gallery of indigenous leaders 
which could be duplicated on a small scale in every state and 
village of the country. McKinley, the pious, respectable patriot, 
the cautious opportunist speaking the language of courage, of 
strength; Foraker, the strong, able, audacious, and unscrupulous 
demagogue; Roosevelt and Bryan, both high-minded idealists, one 
a confirmed chauvinist and jingo with an immense store of practical 
political skill, the other an uncompromising crusader for fixed 
causes; Hanna and Quay — bosses — Quay openly corrupt and de- 
riving his power from his dominion over an unspeakably rotten 
state machine, Hanna getting his power from the stores of money 



which he could command from the combined forces of business 
organizations interested in public privileges of all sorts. He was 
the businessman turned politician, with very low standards of pub- 
lic principles, but standing resolutely by them. 

Of these, the most important in Hanna’s career was McKinley. 
The Major, as he was known, was in 1888 just forty-five years old. 
He had already served six terms in Congress, where he had attained 
fame as a militant protectionist. When President, he said of Theo- 
dore Roosevelt that “he was always in such a state of mind.” This 
described a temper precisely the opposite of McKinley’s. The 
Major never tilted at abuses. Mark Hanna was not more satisfied 
with the world as he found it than McKinley, whose name is iden- 
tified with no effort in any direction to enlarge or improve the condi- 
tion of his fellow men. 

He was a type peculiarly useful to stronger men in our boss- and 
business-ridden system. The busy, practical purveyors of privilege 
and collectors of graft who rule the machines must have well- 
favored men who can be thrust out in front to give a good appear- 
ance to their ranks. McKinley was peculiarly fitted for this role. He 
was a pious soul, eminently respectable, handsome, distinguished in 
appearance, an able speaker, and greatly admired for his domestic 
virtues. He staged himself elaborately and remained always in 
character. He was a man who looked learned and yet who possessed 
very limited information of history or economics or law. He was 
never a student or reader of books though he came to be looked 
upon as a model of wisdom. His range of ideas was, like Mark 
Hanna’s, limited. He took up the philosophy, the mood, the charac- 
ter of the generation in which he was born and held fast to it. 

A kind of legend grew up around the sweetness and patience of 
his home life. His wife was an epileptic. As a result she was a whim- 
pering, querulous creature who spent her life in the contemplation 
and nourishment of her own sufferings. McKinley was deeply de- 
voted to her. He yielded to this complaining and difficult woman a 
romantic and chivalrous attention that made Mark Hanna exclaim, 
“McKinley is a saint.” Hanna, like Joe Cannon and other contem- 



poraries, liked the society of men, enjoyed a rubber of whist and an 
evening of chat. He was a simple soul and easily mistook McKinley’s 
lack of fondness for these perfectly normal masculine enjoyments 
for a kind of sainthood. 

McKinley had an easy, unruffled amiability that never permitted 
him to quarrel with anyone. In his very first meeting with Hanna — 
which Hanna incidentally never remembered — the Major as a 
young attorney was engaged to defend a group of miners who were 
tried on a charge of damaging one of the Hanna company mines 
during a strike. Mark Hanna represented the operators in that fight 
and was present at the trial. One of Hanna’s biographers refers 
feelingly to the pleasant impression that the attorney who defended 
the miners made upon the wealthy operators present by his kindly 
recognition of the fact that in prosecuting his clients they were 
merely doing their duty as they saw it. McKinley saved every ac- 
quaintance, good and bad, for a rainy day. 

His critics accused him of weakness. He was certainly not a strong 
figure. He could yield and trim and change and backslap and smile 
with all manner of men on all sides of all questions. But when the 
issue reached that line where the career of the Major was at stake 
he could reveal sudden and unsuspected resources of iron. 

He was far craftier than the forthright Hanna. He was a man of 
endless caution. He seldom committed his views to writing or his 
political thoughts to letters. He had a fondness, which his associates 
noticed, for messengers. When he did write, it was often for the 
purpose of putting himself on record, a precaution he did not fail 
to use with his most devoted friends. He had one faculty that he 
employed with great success — his ability to varnish over any sort 
of cause, however dubious, with pious platitudes. When Dewey took 
Manila, McKinley could cable him to report immediately which 
was the richest and most desirable of the islands and then turn to 
the nation with a ringing defense of annexation as “benevolent as- 

Foraker was a very different man — strong in his own right, an 
able debater, a powerful figure on the hustings or in a convention. 



He ruled an effective machine. When he went to the Senate he be- 
came a loud, warlike, ready champion of every form of corporate 
activity until William Randolph Hearst drove him from public life 
by exposing his acceptance of money from the Standard Oil Com- 

For many years these two — Hanna and Foraker — battled for 
supremacy in Ohio. At that 1888 convention already referred to, 
Hanna assumed the leadership of John Sherman’s drive for the 
nomination. Foraker was Governor, a rising figure, enormously am- 
bitious, and with an eye on the presidency himself. One day before 
the convention assembled Foraker walked into Sherman headquar- 
ters and saw the ruddy-faced Hanna, now bereft of his whiskers, 
surrounded by Southern delegates. His fingers were filled with cur- 
rency and he was handing it out freely to his Negro guests. “Far 
from home and short of cash,” as Foraker described them, these 
delegates were selling their tickets for the convention gallery seats 
to Hanna and throwing in their souls for good measure. Of course, 
Hanna did not want the tickets. As a matter of fact, he turned the 
batch over to an associate who had them in a trunk many years 

Foraker, who understood the dramatic values of opportune in- 
dignation, pretended to be shocked at this wholesale direct cash 
bribery. He denounced it. Hanna defended it as necessary since 
other candidates were doing it. 

Hanna’s candidate, Sherman, was decisively defeated. Harrison 
was named to oppose Grover Cleveland but the man who left that 
convention with the largest dividend was William McKinley. 

The two men were thrown together intimately during the conven- 
tion. Hanna was astonished at the shrewdness and sagacity of Mc- 
Kinley. His surprise was mixed with pleasure because McKinley’s 
talent was beautifully garnished with a show of high-minded senti- 
ments. Hanna himself was a more or less artless creature. He was 
blunt, outspoken, direct, utterly without guile. He moved always 
by the shortest route to his objective. He rested upon an almost 
childlike faith in the right of his class — business — to have its way, 



to make its profit, and the bigger the profit the better for the coun- 
try. Workmen were proteges who should be dealt with benevolently. 
Loyalty to friends, right or wrong; a profound respect for the power 
of money to achieve its ends, and a willingness to use it as well as 
all the other recognized implements of political warfare, made up 
the balance of his creed. Hanna was not always a cautious man. He 
could explode with wrath at inopportune moments. McKinley was 
the soul of caution. Moreover he resolved every action into one of 
high moral ingredients. If he refrained from doing anything because 
it was inexpedient he could give his omission the appearance of a 
personal sacrifice. Hanna came to be very fond of McKinley and 
this deepened soon after into a genuine affection for the rising con- 

Hanna was sure now that John Sherman could never be named. 
He was also convinced that McKinley could have been named with 
a proper drive behind the effort. He had no notion of relinquishing 
his one ambition — to name a President — and he resolved to devote 
himself henceforth to bringing about the nomination of McKinley. 

Harrison was elected by a narrow squeak, the popular majority 
going against him. And immediately the Cleveland coal and iron 
man went doggedly about pushing the interests of his new candi- 
date. He went to Washington to promote McKinley’s race for 
Speaker. But Thomas B. Reed, a stronger man than the Major, 
could not be beaten. Reed named McKinley chairman of the Ways 
and Means Committee and thus his name was given to the ill-starred 
tariff measure that would bring defeat to his party, sweep him from 
Congress, but in the end force McKinley to the top as the logical 
candidate of the Republicans in 1896. 

Framing the McKinley bill made one of the most disgraceful 
chapters in the history of national legislation. McKinley called in 
the various special interests to be favored and told them to write 
out their own schedules. Advice was asked of no one else. Even so 
orthodox a protectionist as Blaine drew back from the surrender. 
He warned his party in Congress. But there was no favor which 
Big Business could ask that seemed exorbitant. When the next elec- 



tion rolled around, the Republican collectors presented themselves 
for their checks. But the checks did no good. Hanna was amazed 
and dismayed at the blast which came back from the country. The 
people had a score to settle and at the ensuing Congressional elec- 
tions the Republicans were swept out of office. McKinley himself 
met defeat partly because of a skillful gerrymander. But the country 
at large knew merely that he had been defeated. The effect upon 
his fortunes was most discouraging. His own spirits sank, but he 
soon learned that he had a manager who could not be turned back. 

Hanna’s problem was very difficult. The clouds were gathering 
over the nation’s business. The government was grappling with 
fiscal difficulties beyond its strength. A hostile Congress offered to 
Harrison endless possibilities of trouble. There was no lack of woe 
in Ohio. Following Harrison’s election, Hanna set out to elect Mc- 
Kinley Governor of Ohio and to remove Foraker from McKinley’s 

He took personal charge of the fight and, when the legislature 
met to select Sherman’s successor in the Senate, Hanna went to 
Columbus and spent his time, his money, his personal influence to 
defeat Foraker. He succeeded. The election of McKinley and the 
defeat of Foraker now made Hanna the most powerful political 
figure in Ohio. Moreover it was widely accepted that he had a gen- 
uine presidential candidate on his hands. 

Thus by his bold management, by his frank recognition of Mc- 
Kinley’s predicament and his fearless acceptance of the difficult 
chance of defeat for his candidate in a year when the tide was run- 
ning strongly against his party, Hanna completely removed all the 
untoward effects of McKinley’s last defeat. Moreover, by Mc- 
Kinley’s election as Governor in a Democratic year, he thrust the 
Major forward again as a formidable contender for the presidency. 

In this fight Hanna collected good political dividends from his 
many years of liberal contributions to the war chests of the party. 
Not only the state and city party machines, but numerous individual 
candidates had made frequent drafts upon the rich banker’s open 
wallet. After the local campaign of 1897, Hanna dropped into Re- 



publican headquarters to find the committee sitting about in lugu- 
brious gloom. When he was told that a deficit of $1250 caused all 
their sorrow, he laughed, wrote a check for the amount, and handed 
it over without being asked. McKinley himself was one of those 
politicians who was in occasional need of money and did not hesi- 
tate to borrow from Hanna. Hanna paid his personal campaign ex- 
penses in 1891. On one occasion he contributed $1200 to the 
campaign of a county treasurer, then collected a group of friends to 
sign the treasurer’s bond for a million, and, thereafter, got a large 
share of the county funds for his bank. 

As the troubled contest of 1892 approached, Hanna perceived 
that McKinley’s moment had not yet arrived. President Harrison 
had the usual commanding call on a renomination. Moreover the 
drift was away from the Republicans. But Hanna had kept his 
man well to the front. Throughout the campaign, while Harrison 
was running for President in 1892, McKinley was running for 
President in 1896, managed by Mark Hanna. And as the waves 
closed over the head of the unpopular Benjamin Harrison, William 
McKinley rose up above the waters as the unquestioned leader in 
the race four years later. 

Mark Hanna, now in collaboration with that peculiar series of 
events that were referred to as the fruit of Major McKinley’s des- 
tiny, went to work to nail down the prize. The Cleveland admini- 
stration struck rock after rock — silver, Morgan’s bonds, the Wilson 
tariff bill, the income-tax fiasco, the railroad strikes and Cleveland’s 
suppression of them with Federal troops. The Democrats were 
doomed. McKinley was triumphantly elected Governor of Ohio. 
Hanna saw a cartoon one day in the Cleveland Leader depicting 
McKinley’s beaming countenance rising like the sun over the pros- 
trate land and Uncle Sam pointing toward him as the Rising Sun of 
Prosperity. Hanna saw instantly the value of that idea. He imme- 
diately dubbed McKinley the “Advance Agent of Prosperity.” 
Thus Hanna managed to put a label on the Republican party that it 
was to wear successfully until it peeled off in the damp of the deluge 
under Hoover. The theory that prosperity is inextricably tied up 



with the domination of government by business was thus won- 
drously stamped upon the public mind. And this was one of the 
notions Hanna believed in with a consuming conviction. 

It was in these years that Hanna moved into that position of 
power that brought him closer to the role of national political boss 
than any other man, before or since, has occupied without actually 
being President. So far as McKinley was concerned his strategy 
was to keep McKinley free of all entanglements and free from asso- 
ciation with any issue save the good old Republican standby of the 
tariff. In a campaign noted for its single-mindedness, its sheer per- 
sistence, its ample treasury, and its freedom from errors, Hanna 
pushed forward the fortunes of his smiling, handsome, and crafty 
candidate until he was nominated and elected president of the 
United States. 

But this drive was interrupted by one strange mischance in which 
it seemed as if all the friendly fairies had quit the entourage of the 
Major. In 1893 Hanna had been summoned to New York by the 
untoward effect of the panic on his own business. A wire came from 
Myron T. Herrick, Cleveland banker, announcing that a man 
named Robert L. Walker, a tin-can manufacturer of Youngstown, 
Ohio, was in business difficulties and that McKinley was caught 
on some $100,000 of his notes. Herrick and others were trying to 
raise sufficient funds to bail the Major out and needed aid from 
Hanna. Hanna hurried back to Cleveland only to find that the blow 
had fallen, that Walker had gone into bankruptcy, that McKinley, 
crushed by the news, had lost his nerve, was threatening to resign 
as Governor, withdraw from political life, go into bankruptcy, and 
devote the rest of his days to repaying his debts. A stranger fate 
never overtook a presidential candidate. 

The whole story of this odd episode has apparently never been 
fully told. But enough has come to light to reveal the ease with 
which the Major all his life could accept the bounty of other men. 
McKinley in his youth had borrowed some $5000 from Walker to 
pay his way through his law studies. This small item McKinley 
never troubled himself to repay. When he became Governor, 



Walker, then in the tin-can business, got McKinley to endorse his 
notes. One day one of these notes made its way to Herrick’s bank. 
It produced some apprehension and Herrick went to the Governor, 
who with something less than candor explained that he owed 
Walker $5000. Herrick got that sum from a rich admirer of the 
Major and sent it to Walker. But the Walker notes with McKinley 
endorsements continued to appear in various banks. The sum 
totaled $130,000. Then Herrick notified Hanna. Before they could 
arrange the necessary funds Walker’s business was devoured by the 
depression. He was adjudged a bankrupt, and the news got out. 

Hanna and Herrick then hurriedly collected the necessary 
$130,000 from a select list of Republicans to pay the Major’s way 
to solvency. Some gave, as John Hay’s biographer informs us, 
“because they admired McKinley, some because he had served 
them in Congress, some because they wanted to save the party from 
unedifying criticisms.” The subscribers to the ransom fund were 
Hanna and Herrick, Carnegie, Frick, Samuel Mather, and other 
big businessmen of Cleveland, John Hay, Philander C. Knox, H. H. 
Kohlsaat, and some others. McKinley’s biographers relate that he 
deeded all his and his wife’s property to three trustees, leaving to 
him only his business block in Canton in which he had an equity of 

Did McKinley ever repay these sums? His biographer and Mark 
Hanna’s are singularly silent on that point. McKinley himself had 
a habit of making up the record for himself and so, although 
throughout this distressing episode he remained under the shelter 
of Herrick’s home, there is extant a letter written by him to Herrick, 
recording his sentiments in grandiloquent terms. He described the 
transaction as the “collection of wildly scattered paper of his into a 
few hands.” He “insisted that this paper be bought dollar for dol- 
lar,” as if he were supplying the cash to his fiscal agents. This paper 
was to be held as an “obligation against me.” Then with an almost 
Pickwickian gesture he declared he would have to decline the pay- 
ment of his debts by his friends on any other terms. 

Myron T. Herrick’s biographer, a peculiarly inaccurate chron- 



icier, declares that McKinley thereafter sent money which he 
saved from his salary. Herrick never appears to have disbursed any 
of it. Instead he invested it, and McKinley referred to “these little 
investments” in a letter to Herrick a few months before his death. 
After McKinley’s death Herrick turned these investments over to 
the President’s widow. 


As the Republican convention assembled at St. Louis late in 
June, 1896, the nation faced a new war of the sections, this time 
between the West and the East, that took a very old form. Always 
in periods of depression the value of money rises and always the 
debtor class clamors for currency inflation in some form. Then 
it was expressed in the demand for the remonetization of silver. 
Hanna’s strategy was designed to suppress the silver issue as Mc- 
Kinley’s history on that point was bad. He had been a bimetallist. 
He had voted to override Hayes’ veto of the Bland-Allison Silver 
Act and he had voted for the Sherman Silver Purchase Act. But now 
he sealed his lips on the silver issue. 

Many men supposed him to be still an ardent bimetallist. The 
California delegation came to the convention instructed for Mc- 
Kinley and Free Silver. The West was for bimetallism. But the 
powerful East, which was Republican, and which would have to 
supply the sinews of war, was for gold. The syndicate that had 
bailed McKinley out of bankruptcy, as Tom Reed sneeringly 
described it, would never stand for a silver platform. Hence at St. 
Louis the position on the money question of almost every man pres- 
ent was known save that of McKinley, the aspirant for leadership. 
Newspapermen prodded Hanna to know where McKinley stood. 
Hanna replied that the convention, not the candidate, made the 
platform, ignoring the apparently unimportant fact that the candi- 
date would have to stand on it. Old Senator Teller of Colorado 
headed a militant silver group unalterably opposed to gold. Henry 
Cabot Lodge and Tom Reed led the Eastern host equally set against 



silver. Hanna wanted the votes of all groups. He brought to St. 
Louis a money plank artfully phrased to satisfy the gold people 
and fool the silver wing. But it encountered in the Resolutions Com- 
mittee Hanna’s old foe, Joseph B. Foraker, who as chairman of the 
Committee forced through an unequivocal gold plank. 

Even after his nomination McKinley refused to take the money 
plank seriously. “I am a tariff man standing on a tariff platform,” 
he insisted. “This money matter is too prominent. In thirty days 
you won’t hear anything about it.” “In thirty days,” replied his 
friend, Judge William R. Day, “you won’t hear of anything else.” 
At first McKinley tried to dodge the money question. He fell back 
upon obscure phrases like “sound money” and “an honest dollar.” 
But Bryan had been named by the Democrats and had the country 
aflame with his holy war for silver. And so in the end McKinley, the 
bimetallist, was forced to unload his old faith and come out openly 
for the gold standard. This was characteristic of McKinley. No man 
could slip from under an issue more smoothly than he. He did no 
bleeding for unpopular causes. He chose with discrimination causes 
which called for no blood. 

McKinley, of course, was nominated by an overwhelming major- 
ity. His nomination, indeed, was a foregone conclusion when the. 
convention assembled — had been, in fact, ever since the Illinois 
convention in April which instructed for him. And when the con- 
vention adjourned his election seemed equally secure. 


It is the custom of conservative historians to describe the fol- 
lowing of Bryan — the silver Democrats and their Populist allies — 
as a horde of maddened, class-crazed, violent agitators threatening 
the foundations of constitutional government. As a matter of fact, 
nothing could exceed the violence of the Eastern supporters of Mc- 
Kinley. They exhausted the resources of denunciation and abuse 
and stormed against Bryan and his “mob of repudiators,” as the 
sober New York Evening Post called them, with incredible fury. 



Theodore Roosevelt, who really knew no more about the money 
question than any cornfield soapbox orator in the West, flayed what 
he loved to call the “Popocrats” who would bring the country to so- 
cial revolution. These dangerous nihilists demanded a graduated 
income tax, postal savings banks, recognition of Cuban independ- 
ence, home rule in the territories and the District of Columbia, bal- 
lot reform, popular election of Senators and the President, the ini- 
tiative and referendum, a program of public works during periods 
of depression, government ownership of railroads and telegraphs, 
and bimetallism. Most of these things have since been introduced 
into our system, and Roosevelt himself would one day out-Popo- 
crat the Popocrats by damning with the same violence those who 
opposed these things. 

The fashionable preachers of New York broke into full cry 
against the enemies of the Lord. Dr. Robert S. McArthur of Cal- 
vary Baptist Church and the celebrated Dr. Parkhurst poured out 
the vials of their wrath upon Bryan, and Dr. Courtland Meyer, 
in Henry Ward Beecher’s old church, dramatically proclaimed: “I 
love the bloodstained banner of the cross and it is in danger.” The 
New York Tribune bitterly assailed Bryan as the rival “of Benedict 
Arnold, Aaron Burr and Jefferson Davis in deliberate wickedness 
and treason to the republic.” The Evening Post saw in the proceed- 
ings of the Chicago convention that named Bryan a duplication of 
the opening scenes of the French Revolution. The abuse and bill- 
ingsgate heaped on Bryan was so savage that Dr. Albert Shaw, the 
conservative editor of the Review of Reviews, took his friends to 
task: “The editors, university professors, and Eastern bankers 
who are calling all the leaders of the West and South anarchists and 
demagogues are making the situation more difficult by their mis- 
chievous folly.” When the contest was over, the Tribune rejoiced 
in the victory which had come because “God is God and right is 
right,” while Cornelius Bliss and Jacob Schiff and Isaac Seligman 
and other great bankers sat around the festive board with the tri- 
umphant leader of the victorious gold hosts and “thanked God for 
Mark Hanna.” 



The fury of the other side was loosed chiefly against Hanna. 
Davenport’s savage cartoon furnished an anthropomorphic devil 
upon which the hatred of the masses could vent itself. Those famous 
caricatures, representing Hanna leading McKinley, a diminutive 
Napoleon, crushing workers, bowling over women and children, pil- 
ing up money bags, and fraternizing with the trusts, cut deeply into 
Mark Hanna’s hide. “These hurt,” he complained bitterly to Sena- 
tor Dolliver. 


There was a deep-rooted reason for these violent emotions. A 
whole new era, a powerful congeries of new interests, the whole 
developing adventure of corporate capitalism or, as it has come to 
be a little obscurely called, finance capitalism, was at the crossroads. 
For a number of years these new interests under all sorts of indus- 
trial “captains” and commercial “kings” had been accumulating 
strength, creating and improving the new instruments of wealth 
getting, bowling ahead with the assistance of growing public ap- 
proval — a kind of hesitant but growing admiration of their prow- 
ess — and the corrupt collaboration of lawmakers and public 

But for several years — particularly since 1 893 — the nation had 
been plunging into a deep and stubborn depression. The clamor of 
the farmers, the Western small businessmen, the workingmen in 
the Western cities for inflation in the form of free silver threatened 
the investments of the great bankers and their clients in the East. 
The rising anger at men like Rockefeller, Morgan, Gates, Harriman, 
and all the railroad buccaneers, the packers, the trust magnates 
reached a critical energy and fervor in the fiery evangel of Bryan 
and threatened the stability and security of that whole great cor- 
porate machine that they had fashioned for the production and 
concentration of wealth. The election of 1896 was a sort of crucial 
battleground that might well determine the course American devel- 
opment would take in the coming years. Certainly the highly ex- 



cited partisans of the period felt it to be so. And this fanned 
their partisanship into the flames that made that whole campaign 
one of the most heated in American political history. At this par- 
ticular moment Mark Hanna became the field marshal of the hosts 
of property in one of the great decisive battles of our own history. 

He segregated and organized big business on the side of the politi- 
cal philosophy that was essential to its existence and he made it pay 
the bills for the warfare he was waging. 

Hanna’s name will always be associated with the perfection of 
that important art popularly known as “frying the fat,” which is 
only a picturesque way of describing the process of rendering into 
campaign cash some of the suet which rich men are enabled to 
accumulate through political favors. It was not at all a new busi- 
ness. As business grew bigger and fatter and more at the mercy of 
government, politicians soon learned how to make the prosper- 
ous ones pay for immunity. William E. Chandler had learned 
how to draw generous sums from men like Roach and Gould. Carter, 
who managed Harrison’s campaign, got $400,000 from the ship- 
builder, George Cramp. In the preceding struggle between Blaine 
and Cleveland, Blaine’s spectacular campaign was brought to an 
end with that famous Royal Feast of Belshazzar when Gould and 
Sage, Astor, Flagler, Mills, Carnegie, and some two hundred 
“money kings” sat down to terrapin, duck, and champagne at what 
the New York World called the “boodle banquet.” Stephen B. 
Elkins needed more money for the last big Blaine effort and the 
money kings were brought together for the frying. 

All this was just a loose way of doing what Hanna would do in 
an orderly manner and on a large scale in 1896. He told corporation 
executives bluntly that they got plenty of service from the Repub- 
lican party and ought not to hesitate to pay for it. He levied an 
outright assessment on every bank. Later he denied a charge in the 
Senate by Senator Teller that he had done this. But his official 
biographer concedes that the assessment was one quarter of one per 
cent. The Standard Oil gave $250,000. Other corporations contrib- 
uted in proportion. How much he actually collected and spent no 



one can say. His biographer admits it was $3,500,000 while Senator 
Foraker, who had opportunity to know, says it was not less than 

The dollar marks on Hanna’s suit, put there by the cartoonist 
Davenport, were intended to represent not Mark Hanna’s own per- 
sonal creed, but the policy of using the money of corporate magnates 
to buy whatever they wanted in public life. And Hanna understood 
perfectly what the money was paid for. He hammered at contribu- 
tors. “I know you people will do the fair thing,” he wrote to Arch- 
bold, paymaster of Standard Oil, “and I want the state committee to 
get a liberal subscription from you this time. . . . This whole fight is 
against the corporations and me as their champion.” When Arch- 
bold wanted service he called on Hanna and wrote him “to enlist 
your aid” to defeat two antitrust bills in the Ohio legislature. He 
wrote again to urge Hanna to be active to defeat Smith W. Bennett 
for attorney-general of Ohio because he assisted Frank Monnett in 
prosecuting Standard Oil. 

There is a popular notion that the Civil War wrecked the Demo- 
cratic party; that after that vast upheaval the population of the 
country became Republican as it had been Democratic before. This 
of course is not true. It was Mark Hanna and the full dinner pail 
and the legend of prosperity that wrecked the Democratic party. 

Obviously Lincoln’s second election, in the midst of the war, and 
Grant’s two elections, with Federal troops in possession of all the 
Democratic states, cover a period of abnormal conditions in which, 
of course, the Democratic party ceased to function. But if we exam- 
ine the elections from 1876 — following the return of the wayward 
sisters — down to 1892, the result is a little surprising. In that time 
there were five presidential elections and in four out of five of them 
the Democrats obtained the undisputed popular majorities. Tilden 
and Cleveland three times obtained more votes than their Repub- 
lican opponents. It must also be obvious now that they also obtained 
majorities in the Electoral College in three out of the five elections, 
since Hayes was declared elected only by giving him the votes of 



Louisiana, Florida, and South Carolina which no man in his senses 
now believes represented the political sentiment of those states. 

In that same period ten Congressional elections were held and the 
Democrats enjoyed majorities in six out of the ten. It was not until 
the election of 1896 and the strange combination of circumstances 
that followed, which established the Republicans as the guardians 
and conservators of prosperity, that Democratic defeat became 
almost a habit with the voters. Since then, out of nine presidential 
elections until 1932, Republican candidates have been victorious in 
seven and they controlled the House in thirteen out of twenty 
Congressional elections. It took the economic cataclysm of 1932 to 
shake them from power. 

The full dinner pail did what a civil war could not do. Hanna 
promised prosperity if McKinley was elected. McKinley was 
elected. Prosperity came. The overwhelming demonstration was too 
much for a people who had been hungry too long. Of course, Hanna 
and McKinley and their tariff promises and their reluctant gold 
dosage had no more to do with the revival of business than the 
incantations of a ring of witch doctors have to do with the recovery 
of a tubercular savage. 

The depression had been forming for years. It came when the 
orgy of reckless railroad building and industrial expansion and 
wild speculation, all on borrowed money, ended because no more 
money could be borrowed. Construction of all sorts ceased com- 
pletely, as it has today. Conquest of the depression was possible 
only by reviving construction — short, of course, of an accident. No 
one seemed to know this save the despised Populists who clamored 
for a program of public works. 

Just before the election the Indian wheat crop failed. This made 
an unexpected market for our own wheat which promptly went up 
to ninety-five cents and beyond all doubt settled the election of 
McKinley. But after the election, prosperity continued to lurk stub- 
bornly around its corner. Stocks rose with the great news of Repub- 
lican victory but fell back again just as they did in 1933. Seven hun- 
dred manufacturing establishments lit their fires but put them out 



again in thirty days. Failures increased and bank clearings were 
lower in the first seven months after the election than in the seven 
months before. 

Hanna was deeply troubled. He did not know that the cure had 
already really set in from wholly uncontrolled sources. First, vast 
new supplies of gold were uncovered and the new cyanide process 
greatly increased the yield from the old mines. In 1904 Leroy Beau- 
lieu pointed out that half the gold then in the world’s central banks 
and treasuries had been accumulated since 1890. But even more im- 
portant, France was swept by a drought, which cut her wheat yield 
by 93 million bushels. The Russian crop was damaged by rains, 
reducing it by 80 million bushels, while storms in the Danube Val- 
ley destroyed over 127 million bushels of its wheat. Moreover the 
good prices of wheat in the preceding fall had encouraged American 
farmers to plant more, so that now, with a tremendous shortage of 
grain in Europe, our farmers had an increased supply. Wheat went 
to a dollar on the Chicago Board of Trade. Our ships hurried over 
the seas laden with grain and returned with gold. As a result the 
gold reserve which was $44,000,000 in 1896 was swelled to $245,- 
000,000 in 1898. The Gold Standard Act was not passed until 1899. 
It required a gold reserve of $150,000,000 and this would not have 
been possible without these two accidental circumstances. 

With this powerful stimulus business started up. We rushed 
forward again into an era of building electric streetcar lines, elec- 
tric-light plants, and skyscrapers; of remaking our run-down rail- 
roads and creating new industries. Capital construction with bor- 
rowed money began again. Income expanded. Prosperity returned. 
And all this without the Grand Old Party moving its fingers, 
though it did move its jaws lustily to proclaim the magic. 


There was a logical and poetic fitness in Mark Hanna’s rise to 
leadership at this moment. He embodied the strength and the weak- 
ness of the people — their perfect attachment to getting along, their 



tolerance of the current art of getting along, their practical organiz- 
ing power, their admiration of the adventurers they were pleased to 
look upon as Titans and whom they called, half affectionately, 
Captains and Kings of Industry. 

Changes were in progress very deep under the surface. Our eco- 
nomic life had been undergoing a revolution. But Hanna himself 
understood little of its meaning. He believed an employer ought to 
be generous to his employees. Hanna always denounced those em- 
ployers who refused to treat with their workers. His own record was 
above reproach on that score. In 1894 when Cleveland sent soldiers 
to Chicago to quell the Pullman strikers, Hanna, standing in the 
Union Club in Cleveland, created an uproar by denouncing Pull- 
man. “Goddamn the man who won’t deal with his men,” he thun- 
dered, until Myron Herrick led him out. That there might be a flaw 
hidden away somewhere in the system itself never occurred to him. 

Of course, this new economic order had to have a philosophy. 
And accordingly a confusion of apologists came forward. Americans 
who knew little of Nietzsche and Zarathustra began to hear much 
of the superman. Privately they would concede that you could not 
hold these great doers to the same ethical limitations that applied 
to corner grocers. Others who were reading for the first time the 
magazine articles about Darwin and Huxley, which were having a 
great popular vogue, explained that we were merely passing through 
a slightly accelerated phase of the evolutionary process, in which 
those strong men were hurrying a little the process of survival. The 
growing economics departments of the older colleges were, for the 
most part, provided with men like John Bates Clark at Yale who 
laid on lustily at the labor movement, and Professor J. Laurence 
Laughlin of Harvard and later Chicago University who could be 
depended on to explain all current phenomena in satisfactory terms, 
to say nothing of hirelings like Professor George Gunton who wrote 
monthly diatribes against the enemies of the trusts and pocketed 
the checks of Mr. John D. Archbold. Of course, pulpits everywhere, 
taking their cues from the Reverend DeWitt Talmage and their 
benefactions from their rich communicants, managed to compose 



the hostile properties of Nietzsche, Darwin, Mammon, and Jesus 
into a new and comforting theological goulash. 

In such a society, agitated at the time by a profound depression, 
Mark Hanna assumed the direction of the political machine that 
would support and protect the ruling elements while they consoli- 
dated their control of the economic machine. He organized Big Busi- 
ness as a cohesive political entity. 

As McKinley’s inauguration approached, Hanna planned to take 
a house in Washington and prepared to assume the role of general 
superintendent of that machine. He had cherished, not an ambition, 
but a kind of remote wish for a place in the Senate. Hanna, despite 
his arrogance, knew his limitations and had a kind of blunt modesty 
and he never dreamed this wish could be fulfilled. Now, however, 
he was being dined and feted and thrust forward and called on for 
speeches. He found himself rubbing elbows with many so-called 
statesmen and became aware that he was not so far behind them. 
Thus the notion was born. 

There was no vacancy from Ohio. Sherman had two years to 
serve. Foraker had just been elected. However, Hanna and McKin- 
ley talked it over and concerted a plan. McKinley would appoint 
John Sherman Secretary of State. The Governor of Ohio could then 
name Hanna to the Senate vacancy. But Bushnell, the Governor, 
hated Hanna. Hanna went to his old enemy, Foraker, and asked him 
to urge Bushnell to appoint him. The idea of Hanna in the Senate 
amazed Foraker. It seemed incongruous. Foraker regarded Hanna 
as inarticulate and ignorant. Moreover, Foraker did not like the 
appointment of Sherman as Secretary of State. He had observed 
at the last Zanesville convention, when Sherman presided, that the 
old Senator’s memory was seriously impaired. He was an aged man 
incapable of coping with the now greatly enlarged duties of the 
State Department. But Hanna’s mind was made up. Foraker went 
to McKinley and sought to dissuade him. McKinley backed Hanna. 
Foraker brought the proposal to Bushnell, who drew away from it. 
But, after all, McKinley was President. He was able to apply the 
necessary pressure. 



In the end Bushnell had to yield — a triumph, thought Foraker, of 
impudence and gall. Sherman was named Secretary of State. But 
Bushnell kept Hanna on the griddle and did not hand the Senate 
commission to him until inauguration day, only a few moments be- 
fore the Senate convened. As for Sherman, his infirmities soon 
asserted themselves. The old man saw very soon that the President 
was passing him over, summoning to the White House the assistant 
secretary, Judge William Day. When war with Spain was declared 
he resigned and retired to nurse his hatred of both McKinley and 
Hanna for having pushed him out of both Senate and Cabinet. 

The Senate into which Hanna moved was now in process of being 
recast. There were plenty of the old school there — notably Senator 
George Hoar of Massachusetts and Senator Morgan of Alabama. 
But the wealthy utility and railroad men and their counsel had 
begun to make their appearance and before long Mark Hanna found 
himself the dominant figure in a ring of lawgivers he could thor- 
oughly understand. There were Chauncey Depew, president of the 
New York Central, and Tom Platt from New York; Matt Quay 
and Boies Penrose, two of the most frankly corrupt politicians ever 
to sit in that body; Stephen B. Elkins, multimillionaire utility mag- 
nate, and Scott of West Virginia; Philander C. Knox, Carnegie’s 
attorney, and Nelson W. Aldrich, another rich utility owner; Keane 
of New Jersey, holder of many gas millions. Of course it was never 
necessary to hand out money to these men, as it was to chaps like 
Foraker and Bailey, to get things done for big business. They were 
big business and they formed under Hanna’s leadership the advance 
guard of that wave of big-business leaders who would swarm over 
the government, seize complete dominion of its machinery, and end 
by plunging it into one of the most crushing depressions in history. 

Hanna had his seat by appointment. He had now to make it good 
by election. He promptly announced his candidacy and, at sixty 
years of age, with fear and trembling for the first time in his life, 
had to go out upon the hustings to support his claim. He quickly 
made good as an able, effective, rough-and-tumble political speaker, 
making two-hour speeches without any notes, flinging back sharp 



replies to the crowds, laying on his opponents with ungloved hands. 
He succeeded in getting a safe Republican majority elected to the 
Ohio legislature and when that body assembled he had no opponent. 
But a hostile coalition soon appeared. The Democrats agreed to sup- 
port a Republican to defeat Hanna. The Republican insurgents and 
Democrats settled on Mayor McKisson of Cleveland and a riotous 
contest soon developed. 

Wild excitement reigned in Columbus. The opposing factions 
provided bodyguards to protect weak-kneed followers from seizure. 
One Hanna legislator was kidnaped and locked in McKisson head- 
quarters, until Hanna men recaptured him and spirited him back to 
their own camp where he was put under lock and key. When the 
final decisive vote was due Hanna had a majority of one. One back- 
slider could upset everything. His supporters were marched to the 
legislature under guard. Armed men patrolled every entrance. Then 
came the bombshell. J. C. Otis, a silver Republican, rose in the 
House and charged that a man named Shayne, in the presence of 
Otis’ counsel, had offered him a bribe of $1750 if he would vote for 
Hanna and Otis electrified the House by producing the $1750. 
This produced a sensation but did not prevent Hanna’s election. 
The House named a committee to investigate. Its members, save 
one, were unfriendly to Hanna. But that lofty gentleman refused to 
offer any testimony. 

The committee heard a number of witnesses, reported their find- 
ings, and the House voted to send the testimony and report to the 
United States Senate with a demand for an investigation. The Sen- 
ate received the demand, sent it to a committee, and that body, over 
a minority protest, reported unfavorably on an investigation. Both 
majority and minority conceded that Otis’ charge seemed to be sus- 
tained. But the majority insisted this did not cloud Hanna’s title. 
The testimony submitted to the Senate is still extant and no fair- 
minded man can read it without admitting it establishes at least a 
prima-facie case justifying further inquiry. Hanna’s contention that 
Shayne, a New York furrier, unknown to his supporters, traveled 
all the way to Columbus without any interest in the election save 



that of a mere busybody and bought a vote for Hanna with $i 750 in 
cash is, to say the least, a little thin. Hanna and his friends blocked 
an investigation and his name must continue to rest under the odium 
of that act. 


Hanna’s career as Senator lasted just seven years. The man was 
undoubtedly ill at ease at first. He never opened his mouth for the 
first two years. Thereafter his contributions to the debates of the 
Senate were limited to five occasions and four subjects, all of the 
type that would readily suggest themselves to the mind. He sought 
to force the Navy Department to adopt the Guthman torpedo, he 
defended the steelmakers in their extortionate price for armor plate, 
he led the battle for the shipping subsidies and also led the fight for 
the Panama Canal route against the Nicaraguan route. He was suc- 
cessful in his canal fight because he was able to unite with the force- 
ful and dynamic Roosevelt. But in none of these did he exhibit more 
than the most ordinary capacities as a debater. 

At first, of course, the problems of patronage consumed his time. 
Office seekers swarmed to his offices and his home so that, it was 
said, he took refuge in his dentist’s chair. He was the most observed 
man in Washington, Visitors to the Senate gallery invariably asked 
to have Hanna pointed out to them first. His mail was the heaviest 
of any man in Washington outside the President’s and he required 
a secretariat to handle it. 

The time came, however, when he could devote more attention 
to his senatorial duties, which he always took with great seri- 
ousness. He attended sessions faithfully and could be seen with his 
large dark eyes fastened intently upon any Senator who addressed 
the Senate. He took almost no public part in the discussions of the 
Spanish war problems. Indeed for two years he followed faithfully 
the course of perfect regularity in his votes. 

His first important entry into the debates occurred in 1899 when 
an attempt was made to resist the exactions of the steelmakers on 



armor plate. The Senate proposed to limit the price to $445 a ton 
and if that price were not met it proposed to instruct the Secretary 
of the Navy to build the government’s own armor-plate factory. The 
steelmakers had been charging $545 a ton. With this attack on one 
of the greatest trusts, Elkins of West Virginia and Hanna broke 
their silence in the Senate and leaped to the defense. The going got 
hard for Hanna. When he found himself confronted by the formid- 
able Senator Ben Tillman of South Carolina he begged for mercy. 
“I appeal to the Senator — I am a tyro here — to give me a chance.” 
He had then sat in the Senate for three years. Hanna declared that 
$445 a ton was a low price. The Illinois Steel Company had offered 
to furnish plate for $240 a ton. Hanna called that a bluff. Former 
Secretary of the Navy Herbert declared it could be made for $192. 
“I think I know as much about it as Secretary Herbert,” Hanna 

He first assumed leadership in the ill-starred ship-subsidy bill, that 
strange measure which, as the stanch Republican editor, Dr. Albert 
Shaw, observed, seemed to have a most mysterious origin. The driv- 
ing power behind this measure, as it came out later, when the Arch- 
bold letters were printed, was the Standard Oil crowd, and chiefly 
Henry H. Rogers, whose company would be one of its chief benefi- 
ciaries. Chauncey Depew wrote an elaborate speech for the bill and 
sent it to Archbold for approval before its delivery. Hanna took the 
lead and made a vigorous fight for it at two sessions. The Demo- 
crats talked it to death the first time. The second time Hanna forced 
it to a favorable vote. But such stalwart Republicans as Spooner, 
Allison, Dolliver, and Proctor voted against it. 

The time came, however, after McKinley’s assassination, when 
Hanna became one of the most active members of the Senate. His 
activity consisted, however, chiefly in the influence he exercised over 
that body, through his political power rather than because of his 
senatorial talents. He won his most noteworthy success in the pass- 
age of the Panama Canal bill. Hanna always favored the isthmian 
canal. So did McKinley. But McKinley was won from the Nica- 
raguan route by the arguments of William Nelson Cromwell, the 



American lawyer lobbyist for the French company at Panama. 
Hanna’s two speeches for the ship-subsidy bills revealed no grasp 
of that subject. They were quite unimportant efforts. His speech 
for the Panama Canal, however, exhibited him at the highest mark 
he could reach. It was a good, clear, and able presentation of a sub- 
ject which he had really studied, perhaps the first one in his life. 

x ■ 

The assassination of William McKinley in 1901 suddenly 
wrenched from Hanna’s grasp the principal lever with which he 
controlled the powerful Republican machine. The “madman” he 
feared most was thrust into the White House. Yet in the midst of 
the McKinley funeral arrangements, Hanna went to the house in 
Buffalo where the new President was sworn in and pledged his sup- 
port. But he frankly made it clear that this did not involve standing 
behind Roosevelt for renomination. Until the end he stood squarely 
on that pledge. Roosevelt consulted him on every important point 
of policy and Hanna was a frequent visitor at the White House. 

Curiously, Hanna’s power in the Senate did not diminish. His 
prestige with the country, indeed, seemed to reach its highest point 
during these years. But all the same the great Boss was now in 
process of disintegration. He was still the foremost figure on the 
Hill. His mail continued to be greater than that of all the other Sena- 
tors put together. To see visitors he did not use the marble lobby 
where other Senators talked to their constituents. He used the room 
of the Vice-President. If he wished to see a Cabinet officer he sent 
for him. He called on no one but the President. He was still chairman 
of the Republican National Committee. He still held the purse- 
strings of the party. He was still the Big Boss. 

Hanna always indignantly denied he was a boss. He hated the 
word. He resented being bracketed with Quay and Platt and Croker 
and Cox and Abe Ruef and those other immortal rascals of the day. 
He was indeed much unlike these men. They were a sorry lot, ex- 
crescences thrown off by the blood diseases of the people, and Quay 



was the worst. If Roosevelt could be described as “pure act,” Quay 
might be described as “pure corruption.” Platt was different. He 
was the complete feline — not at all lacking in the essential virtue of 
dishonesty but veneering it, as Quay did not, with a thin coat of 
urbanity and piety. He wrote a book of hymns. He was “pure craft.” 
Dick Croker, on the other hand, was pure force — a plug-hatted ruf- 
fian, beating down rivals with the sheer power of his blackguard 
spirit as he had once done with his fists. Hanna, with less education 
than all these men save Croker, was, however, a more civilized be- 
ing. He paid out his money and never took any. He represented an 
idea — a bad idea — but one which a well-fed minister of the Lord 
could openly defend in his carved-wood pulpit. But all the same it 
was an evil thing destined to curse this rich land with poverty and 
chaos. He stood for the unrestrained sway of the acquisitive man, 
the power of money emancipated from ethical and social law, to buy 
men and to rule them. 

But at this moment Mark Hanna, for the first time in his life, 
faced a situation he did not know how to deal with. He faced a man 
who was as audacious, as direct as himself and swifter in action. 
The weapon Hanna understood best was the club ; his strategy was 
the frontal attack. His ammunition was cash. These things he could 
not use now and he knew no other way. 

Like all successful men, good luck had played heavily on his side. 
He had hammered away for twelve years at making a President. 
He continued hammering until the day came when the cards fell his 
way, with the Democrats in power with a ravaging depression 
on their hands. That party was hopelessly divided, and Hanna had 
the perfect candidate in his possession. He promised prosperity and 
prosperity came. That the causes were different didn’t matter. He 
had unlimited funds to use against a bankrupt opposition. 

But now the tide moved not with but against him. He was at sea. 
And he was sick. And out there across his path stood a young antago- 
nist, aflame with energy and ambition, who also understood the 
frontal attack, who knew precisely what he wanted, and who did not 
hang back from striking at the critical moment at the puzzled and 



vacillating Hanna. Such a blow he struck in 1903 when the Repub- 
lican convention met in Ohio. 

The rise of Hanna as a presidential possibility came first, feebly, 
after McKinley’s second election and then more actively after his 
assassination. Newspapers referred to it continually. Important 
business groups talked about it. He himself said nothing save an oc- 
casional assurance to friends that he did not wish the nomination. 

As the year 1903 wore on, the drive to nominate Hanna gathered 
force. It was engineered almost wholly by a group of powerful in- 
dustrialists and financiers from Wall Street. They organized a com- 
mittee and raised $100,000, with a promise of $250,000 for the 
campaign. They felt sure of New York, of Ohio, and of the colored 
brethren in the South. Quay stood aloof. John D. Archbold of the 
Standard Oil Company tried to bring Quay into the fold. But the 
shrewd Pennsylvania boss remembered how Hanna had run out on 
him when his seat in the Senate was threatened. There is no doubt 
that Wall Street determined to defeat Roosevelt. But Hanna refused 
to give his consent. Colonel Oliver H. Payne, of Standard Oil, went 
to Cleveland in the fall to urge Hanna to come out for the nomina- 
tion. But he refused to do so. He wrote Scott that he would refuse 
to say anything more about it. 

There is no doubt that Hanna was at sea. He of course would have 
been willing to be pressed into the White House. But he had no wish 
to be defeated for the nomination by Roosevelt. What he wanted 
most at the moment was washing clean his name. He chaffed under 
the stain of his first election to the Senate. He wanted re-election by 
a decisive majority. He had to run for the Senate that year. He had 
to meet again his ancient enemy, Tom Johnson. Johnson was a 
candidate for governor. The Democrats had a highly respectable 
candidate for the Senate. Johnson swept over Ohio with a big circus 
tent, denouncing Hanna as the agent of Big Business and demand- 
ing the single tax, free trade, war on the trusts. Hanna followed him, 
with Myron T. Herrick running for governor and Warren G. Hard- 
ing for lieutenant governor — the Three-H Ticket. Johnson’s attacks 
lashed Hanna, despite his failing strength, to apoplectic spasms of 



retaliation. He had his own tent, his own brass band. He called 
Johnson a carpetbagger, a faker, an anarchist, a blatherskite, and — 
worst of all — a Socialist. But Hanna won and got his re-election to 
the Senate by an enormous majority. 

But he knew the weary engine was running down. After the Ohio 
campaign he found himself exhausted. His wife, his doctor, his 
friends all urged him to rest. But rest was impossible to Mark 
Hanna. His life was in pressing along. And he continued to press 
along until the worn and tired body fell under the pressure. He fell 
ill in December, fought against the growing weakness, got up sev- 
eral times and resumed his duties. But in the end an enemy appeared 
he could no longer ignore, typhoid. And while the papers continued 
to debate whether he would be a candidate, he lay dying in the Ar- 
lington Hotel. The end came February 15, 1904. Thus Roosevelt, 
whose first term was made possible by the death of McKinley, 
found his road cleared for a second term by the death of Hanna. 
After Hanna no leader remained to oppose him. 

It is a popular fallacy that Hanna grew as he met new and wider 
horizons in public life. This is not so. He stood on labor precisely 
where he stood as a young employer. On other subjects he never 
altered his views. In the last half-dozen years he remained the same 
uncompromising tory he had been in the beginning. He had nothing 
but praise for the scoundrels who poisoned the army in the Spanish 
war. He stoutly denied there was a single trust in the United States. 
He went to Ohio in his last years to wring from the legislature per- 
petual franchises for his utility companies. He wrote and received 
the famous Archbold letters. In the last months of his life he stood 
by the notorious Rathbone and Perry Heath, who had been thrown 
out of the Post Office Department for the frauds unearthed by 

Hanna, the iron man, justified the extortionate armor-plate prices 
of the steel trust. Hanna, the shipbuilder, supported shipping sub- 
sidies. In the last days as in the first he was the symbol of the power 
of money to buy its way wherever it wished to go. The new rulers 
of our great industrial empire felt that their privileges were threat- 



ened, not by Socialists, but by what they called the populist element 
in politics. These men required for their adventures a collection of 
tools — banks, affiliates, corporation laws, securities, monopoly 
practices — all of which were impossible without the protection of 
the government. They felt that control of the government was essen- 
tial. They feared Roosevelt and Bryan and they believed their se- 
curity lay in making Hanna President. But they were mistaken. 
After the victory in 1896 — the election of McKinley — they needed 
no more protection. Their system, their ethics, their ideals were 
hopelessly embedded in the system. The way was clear no matter 
who held office for the adventures that were to follow. 


John D. Rockefeller 



The appearance of John D. Rockefeller marks the beginning of 
that historic struggle between the government and organized busi- 
ness for the control of our economic life, which now moves to its 
final phase. One may doubt whether anything can be done to turn 
aside the stream of inevitable logical sequence. These powerful 
movements in society intrude themselves at first like a small trickle 
that, ignored too long, becomes the invincible force of a vast ero- 
sion. The Civil War might have been prevented when the first boat- 
load of African slaves landed on these shores. After that it was too 
late. Perhaps the time to have checked the rise of Fascism in Amer- 
ica was when that first group of promoters set up the industrial 
town of Lowell with the seeds of all the growth of finance capitalism 
in their small corporate structure. And yet it seems that perhaps 
the critical point is to be found in the ’seventies, when Rockefeller 
and his contemporaries began to use with understanding those 
weapons that now, in their perfected form, make up the arsenal of 
the modern corporate chieftain. 

It was at this period that men began to tinker with the idea of 
controlling the economic society. They talked affectionately — as 
they still do — of that thing they call free enterprise. But they went 
feverishly about restraining the freedoms at every point. They 
were so far from wishing the society to be free that they forged all 
sorts of devices for limiting, even destroying, its freedoms. It was 
not the economic society they wished to be free. They wanted to be 
free themselves, which is quite another matter. They wanted to be 


Davis and Sanford 

John D. Rockefeller 



free to subject the workers, consumers, and their competitors to 
such limitations and laws — affecting price, production, and terms 
of competition — as suited their objective, which was profit. 

For seventy years this development would go forward. And dur- 
ing sixty-four of those seventy years the government would fight 
this development. The thing that organized business called “gov- 
ernment interference in business” was not interference at all. 
Rather it was an attempt to prevent interference in business. These 
promoters, magnates, trade combines, cartels, trade associations 
were all attempting to interfere in the business activities and enter- 
prises of businessmen generally — to make laws, regulations, agree- 
ments — to control business. The whole aim of the government, so 
far as it was pursued, was to keep free enterprise free — free from 
the intrusions and restrictions of organized business groups. In 
practice, however, the government was hopelessly defeated in this 
objective. Its attacks were halfhearted because its lawmakers, its 
executives, its judges were either the agents of organized business 
or at least men whose whole philosophy ran along with it. So that 
after sixty years of this gradual disintegration of the freedoms of 
free enterprise, culminating in an epochal depression, the liberal 
groups that had always fought the development surrendered and 
became the chief apostles of control. 

The little war that we shall witness in the oil regions of Pennsyl- 
vania in 1872 was the first battle in a long struggle that ended in 
the strange episode of 1933, as Franklin Roosevelt came into power, 
known as the National Recovery Administration — the NRA. This 
was the complete adoption of the principle that the economic prov- 
inces of society and society itself must be subjected to rigid controls 
by the representatives of the producing groups under the general 
supervision of the government. It was just one of the concluding 
phases of the march toward the Fascist society, of which the cor- 
porative system is the economic expression. The NRA was the high 
point in the latest phase of this development toward the corporative 
state. The early projects of John D. Rockefeller in the ’seventies 
marked the serious beginning. 




John D. Rockefeller was born July 8, 1839, in a small farmhouse 
just outside the then thriving village of Richford, New York. It 
was a farm without a farmer — for his father was a mysterious, rov- 
ing peddler of medicines who appeared at the farmhouse only in 
the intervals between his long journeys over the country. Forced 
by the uncertain adventures of the elder Rockefeller to move fre- 
quently, the family lived first near Owego, then in Moravia, in 
Cayuga County, then back to a small farmhouse near Owego 
again, and then, when old Bill Rockefeller was indicted for some 
irregularities with some rustic wench, across the state and into 
New Connecticut in Ohio. The family settled in Strongville and 
later in Cleveland. And slowly the lusty old journeyman-pill-sales- 
man drifted out of their lives. 

Young John D.’s education consisted of the usual first years at 
the village school near Owego, then to Owego Academy, a small 
institution apparently partaking of the qualities of a junior high 
school, and finally to Central High School in Cleveland. When he 
finished there he took a course in B. S. Folsom’s Commercial Col- 
lege, from which he was graduated in 1855 at the age of sixteen. As 
things went in those early days it was about as good an education 
as was afforded to all but that small number of youths who were 
privileged to go to college. It was very different from the educa- 
tion that the lordly young J. Pierpont Morgan was absorbing 
at the same time in select schools in Boston, Switzerland, and 

At these schools Rockefeller met at least three people who were 
to play important roles in his life. Thomas C. Platt, the “Easy Boss” 
of New York, was at Owego Academy. At Central High in Cleve- 
land one schoolmate was Mark Hanna and another was Laura 
Celestia Spelman, who was to become his wife. 

His first job was as a clerk in the office of Hewitt & Tuttle, com- 
mission merchants, near the docks in Cleveland. He was paid $400 



the first year, a little more the second, was offered $700 the third 
year, but demanded $800, and quit to launch his own business as 
a commission merchant with Maurice B. Clark as a partner, under 
the name of Clark & Rockefeller, along River Street. Thus, at 
eighteen, the precocious enterpriser was his own master. His firm 
cleared $4400 the first year and $17,000 the second year. When he 
was twenty, Rockefeller was a successful businessman and recog- 
nized as such in Cleveland. He was a quiet, handsome, dignified, 
serious, earnest young man, utterly absorbed in the important busi- 
ness of getting along. He had joined the church — the old Erie Street 
Baptist Church. He went to no plays, played no games, took part 
in no movements, acted on no committees, but resolutely “minded 
his own business.” His diversions were found wholly at the Erie 
Street Church, where he acted as usher, took up collections, taught 
Sunday school, and religiously attended all the picnics and church 
affairs. He was in all things the model young Christian businessman. 

On August 21, 1859, Col. Edwin L. Drake struck oil at Titus- 
ville on Oil Creek in Pennsylvania, an event that was to have more 
far-reaching consequences than the discovery of gold in Califor- 
nia ten years earlier. 

This discovery made no immediate sensation in Cleveland. A 
few businessmen ventured a timid investment in the new industry. 
Some merchants along River Street commissioned young Rockefel- 
ler to look over the prospects in oil. He did so, made up his mind 
that the refining end was the only department worth considering, 
but advised against going into that. 

The oil towns along the Allegheny River grew in activity, tur- 
bulence, and the mad and disorderly pursuit of new riches on the 
pattern of the mining towns of the West. The whole business par- 
took of the nature of a gamble. Oil fetched twenty dollars a barrel 
at the well until i860. Then it slipped to twelve dollars. Wells mul- 
tiplied. Oil flooded the valley. The price went to seven dollars, to 
two dollars. No one knew when these wells might run dry and the 
whole adventure come to an end. When the Civil War broke over 
the country, petroleum sank to ten cents a barrel. 



It was at this point that Rockefeller decided to go into oil. He 
was twenty-two. Lincoln was calling for men. But Rockefeller, like 
young J. P. Morgan, had his own business to consider. He went on 
no committees, joined no movements, got mixed up in no wars. 
There would be no wars in the world if the John D. Rockefellers 
and the J. P. Morgans had to fight them. 

Walworth Run, near Rockefeller’s commission house, reeked 
with the smell of oil. Many little refineries making kerosene for 
lamps flourished there. One was operated by Samuel Andrews, a 
practical mechanic, who had been a maker of candles and was then 
a maker of lamp oil. He needed capital, which meant a partner. He 
also needed management, needed it worse than he knew. Rocke- 
feller and his partner Clark became silent partners of Andrews. 
After two years both silent partners saw the golden profits in oil. 
Rockefeller made up his mind he was done with vegetables. He sold 
his interest in the commission business to Clark, He bought Clark’s 
interest in the oil business for $72,500 and paid for it in cash. That 
was in 1865. The circumstance that decided Rockefeller was the 
discovery of oil at Pithole. That revealed to him that there was 
plenty of oil in the ground. The new firm became Rockefeller & 
Andrews. The year before Rockefeller had formed another part- 
nership — he had married his old schoolmate, Miss Laura Spelman. 
His amazing career was soundly launched. 


The commercial world thinks of the oil industry — or indeed any 
industry — as the product of certain groups of able enterprisers of 
the Rockefeller type. The oil industry, like the electrical industry, 
resulted from a long series of discoveries, experiments, inventions, 
adventures. Men active in those fields enabled the oil industry to 
become a source of wealth. The enterprisers swarmed over the oil 
industry after the real pioneers had created it. 

Because America wanted better light than candles gave, lamps 
had been invented. They burned whale oil in New England, lard 



oil in the West, cotton-seed oil in Virginia, camphine distilled from 
turpentine along the Gulf Coast. Then coal oil was distilled from 
shale. All these were costly or limited in supply. Back in 1833 Pro- 
fessor Benjamin Silliman of Yale found that a luminant oil could 
be distilled from petroleum. Others explored that idea in the late 
’fifties. Dr. Samuel Kier, who sold petroleum taken from salt wells, 
distilled kerosene from the crude oil, invented a lamp, and did some 
business. The commercial possibilities of kerosene were apparent. 
Only the supply of petroleum was lacking. That is why some men 
had their eyes peeled for it. 

Along the Allegheny River in Pennsylvania, Dr. H. F. Brewer 
saw oil floating on the surface of Oil Creek. He sent a sample to 
Professor Crosby at Dartmouth who refined it and pronounced it 
a practical luminant. Crosby showed it to George H. Bissell, New 
York lawyer, with a promoter’s instinct, who went to Venango 
County, Pennsylvania, and bought 103 acres. He took a partner, 
Jonathan G. Eveleth, organized the Rock Oil Company, which 
collected oil from the surface of the streams. But the supply thus 
gathered was negligible. The idea of drilling for oil — an idea that 
was worth billions to a generation of oilmen — originated with Eve- 
leth. Salt wells were worked by drilling. Salt wells yielded some oil. 
Why not drill deeper and, perhaps, find more oil? Eveleth orga- 
nized the Seneca Oil Company and induced Edwin L. Drake, a con- 
ductor on the New York, New Haven & Hartford Railroad, to 
undertake the drilling on a royalty basis. After innumerable dis- 
couragements and difficulties, Drake’s drilling was crowned with 
success on August 21, 1859. These were the pioneers — Silliman 
who distilled petroleum in 1833, Kier and another named Ferris 
who saw the commercial possibilities in kerosene and produced a 
suitable lamp, Brewer who surmised that Oil Creek would yield 
enough oil, Crosby who confirmed the luminant properties of the 
Oil Creek product, Bissell who made the first effort to get oil there, 
Eveleth who conceived the idea of drilling, Drake who did the 
drilling and found that ocean of liquid gold that would change the 
living habits of the world. I need hardly say that none of these men 



made very much money out of their contributions to the industry. 
Drake died in poverty and would have starved save for charity. 

It was so with the men who contributed the various devices and 
techniques of production and distribution after the industry was 
established — the men who originated the tank cars and pipelines 
and the process of manufacture. For example, Samuel Van Syckel, 
who invented the pipelines, became involved in ruinous litigation 
with the Standard Oil Company over patents and processes and 
died with but a small money reward for his services. 

After the Civil War the industry revived, as Rockefeller had 
foreseen. New cities and towns sprang up along the Allegheny 
River, new and foolish fortunes flowered, hotels flimsy but gaudy, 
opera houses, dance halls, gambling joints, houses of prostitution, 
chambers of commerce, streets of mud, politicians, pettyfoggers, 
quacks of every description flourished. 

The impact of Rockefeller on the industry became very quickly 
its great central fact. His growth was extraordinary. In 1867 he 
induced his brother William to join the firm of Rockefeller & An* 
drews. A separate firm was established in New York — William 
Rockefeller & Company — to handle the export business. 

Rockefeller’s ceaseless need was money. Money was got in those 
days by borrowing at the bank, taking a partner, or getting credit 
from dealers. Rockefeller solved his early money problems by tak- 
ing in partners. One of the first was Henry M. Flagler, who had 
married a daughter of Stephen V. Harkness, wealthy whisky manu- 
facturer. Harkness put $70,000 into the Rockefeller business, be- 
came a silent partner, and made his son-in-law Flagler an active 
one. Harkness died worth countless millions as a result of that 
happy gamble. The firm became Rockefeller, Flagler & Andrews. 

In 1870 Rockefeller turned his business into the corporate form 
•—the Standard Oil Company. He could refine 1 500 barrels a day— 
largest capacity in the world. Cleveland became the largest refin- 
ing center. He employed about 300 men in his refineries; 600 more 
were busy making barrels for him and operating 20 teams. He em- 
ployed about a million dollars in the business and had outstanding 



bank loans as high as $350,000. In the Standard, Rockefeller held 
2667 shares; William Rockefeller, Flagler and Andrews and Hark- 
ness, 133 shares each; O. B. Jennings, 1000 shares. There were 
thirty refiners in Cleveland with a capacity of from two to 1500 
barrels a day. 

Rockefeller’s next move was to buy up nearly all his competitors 
in Cleveland, absorbing them into a single concern — the Standard. 
From this point on his course was one of gradual absorption. First, 
he acquired all the brains of the industry — rivals like Pratt and 
Rogers and Archbold and Vandergrift; second, he took over all his 
competitors without distinction, paying them in cash or Standard 
Oil stock. Those who took Standard stock and held it died rich. 
This process continued until the Standard Oil Company became 
as near to a complete monopoly as any such business in modern 
history, while the business itself produced a flock of fabulous multi- 
millionaires whose names became household words in the realm of 
finance and industry for the next two generations. 


Behind this very simple chronological account of Rockefeller’s 
personal rise to fortune lies the whole story of the rise of American 
big business. The entire tale can be told in the life of this man. 

What happened in the oil regions is one of the great epic stories 
of American life and growth. It surpassed in drama, in importance, 
and in the outpouring of riches the great gold saga of California. 

The story is more or less embedded in the American mind as a 
dramatic struggle between great numbers of noble little business- 
men fighting to preserve the ways of free enterprise against a great 
and ruthless giant who sought to strangle not only them but the 
American system of free opportunity. What follows is a very great 
oversimplification of that story. 

It was, in fact, a logical development of the forces that were at 
work, which few understood, and that were forcing men with the 
invisible but irresistible motion of a glacier. 



Three sets of influences had been operating in America. One was 
the discovery and development of our vast natural resources, 
hitherto undreamed of. Another was the widening of the markets 
in which men could work and sell, a process made possible by the 
development of the railroads and the flood of immigration. The 
other was the development of machine methods that was but a 
lengthening and quickening of the industrial revolution. 

The new age of big business was really beginning. Of course, for 
many years an increasing number of larger plants had been erected, 
but as yet there were few very large concerns. The pattern of in- 
dustry was not greatly altered as yet save in spots. Every village 
had, in addition to its merchant, its barber, its saloonkeeper and 
hotel man, a group of small industries that supplied its own people 
— the shoemaker, the tailor, the tinsmith, the blacksmith, who 
made simple farm equipment and other materials, the wheelwright 
who built wagons, the gunsmith, the sawmill, the whisky still, the 
apothecary, the tobacconist who made cigars and cigarettes, the 
dressmaker. Mostly raw materials and a few standard articles came 
in from outside, but foods were prepared almost wholly in the 

The city reflected this manufacturing self-sufficiency. Cleveland, 
when Rockefeller went into business, had twenty-one flour mills, 
twenty-seven clothes factories, seventeen boot and shoe factories, 
thirteen furniture factories, seventeen machine shops, and fifty 
lumber mills. They supplied their local markets. There were a few 
large industries, of course. The textile mills were among them, lo- 
cated largely in New England, employing thousands of workers. 
The sewing-machine companies were operating large plants and 
selling everywhere, with gaudy showrooms. McCormick was mak- 
ing reapers, Case threshing machines, Studebaker wagons, Deere 
plows. At Chicopee Falls, Ames Brothers employed a thousand men. 
The arms factory of Colt was a modern plant. The machines were 
tooled, handwork abolished, platforms provided with jigs and 
cranes instead of men. E. K. Root, superintendent of the Colt arms 
factory, was the mass-production god in that machine. He got the 



fabulous salary of $25,000 a year. And so we see that while pro- 
duction and distribution was in the hands of small businessmen, 
the large production unit had made its appearance, and while pro- 
duction was carried on chiefly in localities, there were already a 
number of industries in which men produced for a national market. 
In short, the notion that Henry Ford or even Rockefeller originated 
mass production is wholly unfounded. 

The development of machinery has taken two forms — first, the 
development of power and, second, the development of processing 
tools. All production involves an expenditure of power. Much of 
that power has always been provided by men, but for many ages 
an immense amount of the sheer power was taken from animals. 
For many years various mechanical devices have also been used 
to convert the power of men and animals to higher potentialities. 
The lever, gravity, pulleys enormously multiplied the power of 
men. But with the invention of the steam engine and the later in- 
vention of electrical power, the power at the command of man has 
been extraordinarily increased. How much, it is difficult to say. Mr. 
Carl Snyder, in his book Capitalism the Creator, makes the startling 
statement that the electrical industry now supplies an output of 
kilowatt energy that equals the product of 500 million men a year. 

But the productive capacity of a nation supplied with the vast 
resources of power we now have must very clearly indicate one of 
the reasons for the greater production of wealth compared with an 
earlier age when power was so much smaller. 

The other phase of mechanical development has been in proc- 
essing machines, power tools that perform a multitude of opera- 
tions. These require very little human power but demand great 
human skill. The linotype machine offers one example. This has 
gone on until it reaches terrifying heights — witness the great auto- 
mobile-frame plant of A. O. Smith in Milwaukee. We have heard 
with awe of the Ford assembly line where the Ford car starts out 
as a mere embryonic frame, then moves along, pausing for a few 
seconds at intervals between long lines of men. Each man at his 
stop puts on a bolt, a screw, a piece of steel, a spring, until at the 



end of the line a complete car emerges. But in the A. O. Smith plant 
all this goes on with a difference. Instead of men adding a gadget 
here and a bolt there, little upright mechanical figures move toward 
the frame as it stops, insert a rivet, hammer it, or perform some 
other one of those cumulative acts that produce a finished frame 
at the end — literally a factory without men. 

This development, therefore, passed through these phases — first 
power, then processing, then scientific management — which has 
had a startling effect upon our immense power productivity in the 
last fifty years. 

The other factor, of course, was the extension of the market. 
Business establishments remained small for the very obvious rea- 
son that they produced for a small market — for the town, the neigh- 
borhood, or the state in which they were located. And this was due 
to the great expense of transportation. Transportation of heavy ar- 
ticles by stagecoach was altogether too expensive. Where a fac- 
tory could reach a new market by means of water it could expand 
its sales, and many did so. But even here serious obstacles arose. 
The transportation problem involved not merely delivering the 
finished product but getting the raw materials. American producers 
actually found it cheaper to bring timber and iron across the ocean 
from Europe than to transport them by horse-drawn vehicles. 
Hence many of our natural resources long remained undeveloped. 
But the railroads were already changing this. A man in Cleveland 
could now produce goods and look for his market not merely in 
Cleveland and along its wagon trails, but wherever a railroad went, 
and railroads were going everywhere as the miles of new track mul- 
tiplied yearly. It cost from twenty to sixty cents a ton mile to send 
flour from Pittsburgh to Philadelphia by horsepower; the same 
shipment could be made by railroad for three cents. 

There was the development and discovery of America’s natural 
resources, especially fuel and iron, the very heart and bones of the 
machine age. It is a singular thing that rich as America was in al- 
most all the essential raw materials up to a decade or so before the 
Civil War, it did not realize these possibilities but depended for 



many materials — iron, copper, gold, silver — upon Europe. It was 
in the fifteen years before the Civil War that men began to find 
those precious deposits of coal, iron, copper, silver, gold, and oil 
that opened up a world of riches to those who were there to use 
them — not merely the mining prospectors who found the wealth, 
but the producers of locomotives, rails, engines. 

These tools, therefore, were at the service of the businessman of 
Rockefeller’s era. It had become possible for any able businessman 
to make far more money because machines, power, and the railroads 
enabled him to operate upon a far larger scale. The producer com- 
manded not merely the increasing resources of the country and a 
great population of customers; he also possessed an immensely 
broadened technological endowment — an endowment from the 
brains of countless scientists, physicists, and inventors over sev- 
eral centuries. This mass of knowledge lay waiting like a huge 
mountain of gold. A man had only to dig in and use it, either by 
mastering its principles himself or hiring with money those who 
had mastered them. 

But this is not the whole story. Large-scale operations required 
far larger sums of money. And the means of bringing together the 
necessary money resources for operation were not as yet very 
highly developed. These money resources involved savings, in the 
first place, and the means of tapping them, in the second place. 

There were banks, but as yet neither the savings bank nor the 
insurance company was very widely exploited. Most banking re- 
sources remained in commercial banks, while the masses them- 
selves possessed a very large part of their own savings. Even count- 
less small businessmen kept their money reserves in their shops or 

The techniques of gathering large amounts of money through 
the machinery of the investment bankers were, of course, known. 
They had been developing since the days of Fugger and Medici. 
But they had been applied chiefly to the money wants of states. 
The bonds of governments and municipalities were issued and sold 
and dealt in freely. There had also been operations in the securities 



of a few large-scale enterprises such as the stocks of the great trad- 
ing corporations of Holland, France, England, and Belgium. And 
in America, railroad stocks had already been sold to large numbers 
of people. Nevertheless, the businessman’s access to money for the 
larger scale operations of the new order was limited. Generally the 
man who wanted additional money went to a commercial bank, took 
in a silent partner or two who had amassed wealth, or else increased 
the number of his active partners. This is what Rockefeller did — 
taking in men like Harkness, Paine, Pratt, and others and borrow- 
ing incessantly at the banks. The corporation enabled partners to 
come into an adventure without assuming liability for more than 
the amount of their stock subscription. 

The selling of stock in industrial enterprises was coming mod- 
estly into use. Most corporations were merely incorporated part- 
nerships with a handful of stockholders. But the possibility of 
expanding the corporation was growing. National resources, ma- 
chinery, power, savings — these were the instruments in the tool 
kit of the modern enterpriser. 


We may now see with some clearness what took place in the oil 
regions — that historic struggle between Rockefeller and his smaller 
rivals. And in looking at it and at the wealth-getting techniques in- 
volved, we may see in camera the whole picture of modern Amer- 
ican business. We see also the growth of that destructive force that 
intruded itself into the capitalistic system as money intruded itself 
into the feudal system and destroyed it. 

The story has been confused and disordered and obscured under 
the forms of the hero-villain theory of human conduct, with Rocke- 
feller as the villain and the little men of the regions as the oppressed. 

What took place in the oil regions duplicated precisely what was 
taking place in other regions and industries and for that matter in 
other countries. In a sense, it was merely an extension of what had 
been taking place for many centuries. Competition between pro- 



ducers has always been disorderly. In its nature — since each com- 
petitor is a little despot in his own domain — it can be nothing else. 
It produces disturbances, personal, social, economic. All com- 
petitors are not equally competent or equally scrupulous, nor do 
they have equal resources. In the nature of competition they con- 
tend for business. It is a continuous contest. It generates quarrels, 
hatreds, controversies, injustices, unfair dealings, wastes, losses. 
Wherever competition has existed its defects have been apparent. 
And men have always attempted to do something about them. There 
were the ancient guilds — organizations of tradesmen, craftsmen, 
merchants to make rules among themselves to regulate their rival- 
ries, soften the asperities of the commercial contest, protect them 
from the operation of economic laws. As the capitalist system ad- 
vanced the merchants formed pools and cartels among themselves 
— they can be found in the fifteenth century. State monopolies were 
established to increase profits. Other merchants sought to bring 
their economic provinces under control through the medium of 
outright monopolies, as in the case of Fugger’s copper monopoly 
in Hungary. 

All down through the years businessmen have made various at- 
tempts to avert the dislocations, losses, consequences of many men 
making the same goods, without the necessity of making agree- 
ments among themselves. 

All this was true during the years when the producer found his 
competitors right in his own town or even neighborhood, could see 
him, chat with him occasionally, keep an eye on him, match his 
stratagems swiftly. Also the conditions of competition were more 
even. Given the same abilities, one man could summon to his 
assistance only a very limited number of artificial aids. And there 
was also a more or less natural limitation upon the individual’s 
power to absorb business. 

This was why there were twenty-one flour mills in Cleveland 
and seventeen boot and shoe factories. 

But all this was changing rapidly. The artificial aids were being 
rapidly multiplied. Machines were being installed with greatly aug- 



mented producing power, thus limiting the number that could enter 
a given field because of the large capital investment required. Then 
there was, quite as important, the widening of the market so that the 
boot and shoe man could compete not merely for the trade of Cleve- 
land but for the trade of cities hundreds of miles away. All the boot 
and shoe factories of all the cities were hurled into competition with 
each other, and competition with more powerful machines, so that 
competition became more violent for the same reason that war be- 
came more violent, because it included more combatants over a 
wider battlefield, using more terrible weapons. The advantage of 
the bigger and richer units in this struggle became obvious. The 
advantage to the better generals became greater. A higher quality 
of ability was needed, rarer abilities were called for. The very size 
of the field and of the combatants added to the fury, the disorder, 
and the fatalities of the combat. 

In the midst of this something was causing trouble. Some strange 
force smote all this machinery for abundance. In simpler times the 
people had fewer resources to draw on; they had to work with 
simpler tools; they had less money and hence were satisfied with 
less. But here was all this flood of riches — gold from California, oil 
from Pennsylvania, coal from Pennsylvania, Virginia, Illinois, iron 
from Michigan, forests illimitable, grain without limit, and new 
machines to multiply the product of every man’s labor. Neverthe- 
less, poverty lingered on, men starved, crises appeared, depressions 
followed on each other’s heels. 

What could be the explanation? Well, it was obvious, quickly 
enough. It was so obvious men thought that they did not have to 
think about it. It was overproduction, they said. Too many peo- 
ple went into every business. Too many people bored for oil, 
dug coal, made iron or sugar or hemp or cord. We simply pro- 
duced more than our people could buy. And when we piled up the 
surplus in the factories, the factories closed down until they could 
dispose of it. So there it was, as plain as a pikestaff — the thing to 
do was to control production and to limit competition and to keep 
prices up so there would be a profit for all. 



This was not new, although the simple man, including Rockefel- 
ler, who labored in the oil regions, supposed it was. It is more or less 
clear from certain remarks dropped in later life that Rockefeller 
believed himself to be one of those misunderstood pioneers who had 
got hold of a great new idea, for which he was despised by his own 
generation until time had proved his wisdom and canonized him for 
it. But all this had happened before. The control of competition has 
been attempted throughout the ages. The old guilds did it. Jacob 
Fugger and his contemporaries tried their hands at cartels. Fugger 
went farther and built monopolies in the copper industry in order 
to control prices and production. The Fugger-Thurzo Company in 
sixteenth-century Hungary was a forerunner of Standard Oil in the 

Indeed, history reveals that the little fellows in the oil regions 
saw this and acted upon it even before Rockefeller did. For these 
oil-well men got the notion that the earth gave up its black wealth 
for their benefit. Although the newcomers who flocked into the oil 
regions were a horde of strangers, they very quickly developed the 
illusion that they had some kind of God-given claim upon these 
riches; therefore, they had a right to govern the flow of oil, to de- 
cide how much would be permitted to flow, what price oil would 
sell for and to whom. They said: we ought to get five dollars a bar- 
rel for it, but we do not get that because too many bore for oil. We 
must unite against the rest of the world to limit the flow. And they 
came to have a sort of conviction that there was something immoral 
about places like Cleveland or Pittsburgh or New York harboring 
refiners to compete with them. 

This is the producer’s complex. It accounts for that series of legal, 
economic, social, and ethical concepts that grow out of the habits 
that men have of looking upon themselves as producers primarily, 
and forming their philosophies upon the basis of their interests as 
producers. Therefore, they organize as producers to get as much as 
they can for their product, and then, as they step into the market 
place with their earnings to spend, find themselves, as consumers, 



helpless and at the mercy of all the other producer groups organized 
against them. 

The real force that was smiting the machine, slowing it down, 
fouling it, and at intervals halting it was something altogether dif- 
ferent. This force arises out of a flaw in the money economy. No 
man can possess himself of food or clothing or anything he needs 
save by having money to buy it. And no man who produces any- 
thing can use it to get what he wants, rather than what he produces, 
save by selling what he produces for money. The thing that men use 
to buy what they want is money. And this money they obtain from 
their so-called money income. 

In order to buy what we need we must convert into money the 
goods we produce or the services we render. Each year the nation 
produces a vast mountain of goods. Each year it pours out into the 
hands of its people a vast stream of money income. It is that money 
income that the people use to buy that vast mountain of goods. 
We have apparently solved the problem of how to produce a moun- 
tain of goods. We could produce twice as much if we wished. What 
we have not solved is how to make that stream of income — money 
income — flow out in sufficient volume, properly timed, to enable 
the people to buy that great heap of goods. 

The problem lies there. The businessmen have supposed that it 
lies elsewhere — that it all comes from producing too much goods 
in that mountain. They bend all their efforts therefore to producing 
less. They overlook the fact that the goods are produced in our fac- 
tories and business enterprises and that our income is produced in 
the same place. In other words, there goes out of all our business 
enterprises every day a great stream of goods into the market place 
and another great stream of money — payments for wages, rent, 
interest, and other services. These naive gentlemen imagine that the 
way to make it possible for them to sell all they produce is to pro- 
duce less — to cut down the size of the goods stream to the size of 
the income stream. What they do not realize is that when they cut 
down the size of the goods stream they also cut down the size of the 
income stream. Shut down a factory and you stop producing goods, 



but you also stop producing income. Curtail production and you 
curtail production of both goods and income. Reduce production in 
order to raise prices and by the very act of raising prices you re- 
duce money income — by reducing its purchasing power. 

American businessmen in the late ’sixties and early ’seventies be- 
gan to play on an ever-increasing scale with this idea of limiting 
production upon the theory that overproduction was our curse. This 
notion persists to this day and has guided all organized business 
policies so far as they have been deliberate. It gradually penetrated 
government policies until finally, under the New Deal, we beheld 
the strange spectacle of the planners for abundance uniting with the 
business leaders to organize the most comprehensive and ruthless 
machine for producing scarcity in the interest of high prices and 
profits. The movement in America that culminated in the NRA 
had its organized beginnings on a large scale in the oil regions in the 
early ’seventies. 

In those regions the competition took on several aspects. First, 
there was the competition between the producers themselves — the 
men who drilled for and produced the crude oil, wells being furi- 
ously put down, newcomers arriving daily, the derricks spreading 
out over all the surrounding hills and farms. 

Then there was the competition between the refiners as such. 
There was the warfare between the producers and the refiners. 
There was the warfare between the various refining centers — city 
against city, Cleveland, Pittsburgh, Buffalo, Erie, New York, and 
others, and the regions against all of them. Oil has been the child 
and mother of war. Finally, there was the warfare between the 
railroads for the traffic and later between the railroads and the 

As early as 1866 the producers discussed a “combine for the pur- 
pose of attempting to make better terms with the refiners in the 
price of the crude product.” The jobbers were also discussing a 
combination with a million dollars to build tanks and store oil to 
hold it off the market to raise prices. The refiners in the regions 
formed into a combination — a league as they called it — and boasted 



in the streets of Oil City that “they were determined to wipe Cleve- 
land out as with a sponge.” In 1870 the producers met in Oil City 
in Library Hall and agreed to stop the drill for three months to raise 
prices. The men in the oil regions were determined to make a mo- 
nopoly out of their oil for the benefit of those in the regions. This 
happened before Rockefeller made any attempt at combination. 

It was at this point that Rockefeller decided upon his course. He 
saw clearly enough his general objective. But it was only after sev- 
eral experiments that he hit upon the final plan that would bring 
him to a virtual monopoly of the oil industry and make him, per- 
haps, the richest man that ever lived. 

Generally Rockefeller’s objective was to do away, in the oil in- 
dustry, with the evil effects of competition and to bring the oil 
industry as such under some kind of central government. Control 
of the economic province of oil was what he wanted. Rockefeller 
looked upon the small oil producer and refiner first as a shockingly 
wasteful and inefficient businessman. Second, he regarded him as 
upsetting the whole industry. Next, he felt that the industry as a 
whole could be operated upon a more secure and efficient basis if 
the small producer were eliminated. And finally he disliked, was 
indeed horrified at, the losses suffered by these little men and the 
losses of profits suffered in consequence by the larger producers. 

His march toward his plan took the form of a series of stratagems. 
And this series may be said to mark the course of most of the other 
large industries. 

First came the general spread of the idea of controlling prices, 
production, and such, by association, such as the small oil pro- 
ducers attempted in 1866. 

The second phase was the cartel system — a sales cartel, used first 
by the salt-well men along the Saginaw River in Michigan in 1868. 
Then came, in 1871, Rockefeller’s organization of the South Im- 
provement Company. Under this plan Rockefeller in Cleveland and 
the leading refiners in each of the great refining centers — Pitts- 
burgh, New York, Erie, the regions — would attempt to form local 



combinations. That is, Rockefeller would attempt (i) to take into 
his company the leading refiners of Cleveland; (2) to buy out the 
balance, and (3 ) to crush those who refused to surrender. The other 
leaders would do the same thing in their regions. Then these leaders 
would unite in a combination called the South Improvement Com- 
pany, which would control the refining industry and dictate to the 
producers of crude oil and the consumers of kerosene. This South 
Improvement Company scheme was advanced by the use of rail- 
road rebates and certain other favorable devices. But the plan be- 
came known before it went into effect. It produced a sensation and 
a storm of denunciation in the oil regions and was killed before it 
got under way. 

Rockefeller’s next attempt was still through association. It was 
a combination of the large refiners in all the regions. Its plan was 
to put the selling of refined and the buying of crude oil in the hands 
of a committee headed by Rockefeller. It too was a cartel. The 
country was divided into districts, each permitted to refine a cer- 
tain amount. It was called the National Refiners’ Association, with 
John D. Rockefeller as president. 

It didn’t work because the members refused to live up to the 
restrictions. The Association had no means of enforcing compli- 
ance. This is, of course, the weakness of these cartel agreements 
in democratic states. Individualists will not obey the rules; the 
democratic state cannot enforce them. Rockefeller in six months 
decided this would not work and dissolved it in June, 1873. It was 
not an exclusive combination. It was to admit every existing re- 
finer. Price schedules were fixed. The Association made a contract 
with the producers. They agreed to stop the drill. The Association 
fixed a schedule of oil buying with them. The producers did not 
live up to their agreement. So Rockefeller broke it and they de- 
nounced him. The Producers’ Association failed and the Refiners’ 
Association was dissolved. 

Rockefeller, however, did not abandon his plan that oil must be 
controlled. He merely decided that this could not be done in a 



voluntary combination. The only means was the outright corporate 

He had an absolute monopoly in Cleveland. He would extend that 
to the nation. He went to the leading refiners in all the large centers 
with a new proposition. It was not that they would join an associa- 
tion, but that they would merge their companies with his Standard 
Oil. He proposed they turn their plants over to the Standard, re- 
ceive Standard Oil stock instead of their own stock, and become 
corporate partners with him, taking their places on the directorate 
of the Standard. Thus he brought in Warden and Lockhart of Phil- 
adelphia. He persuaded Pratt of New York, Archbold of the 
regions, Henry H. Rogers, Vandergrift, and others. Before long, 
all the important refiners in the industry were Rockefeller’s part- 
ners in a corporate organization. When Rockefeller sat down with 
them now it was not as a member of an association but of a corpo- 
ration of which they were complete masters. 

They then set out to crush all competition so that they could 
make laws for the oil industry in their board rooms with no one to 
question them save their employees. They succeeded in this — in 
building the nearest approach to outright monopoly yet known in 

In all this Rockefeller and his associates encountered grave dif- 
ficulties, savage opposition. State and national governments pur- 
sued them. Legislatures investigated them. Courts prosecuted them. 
Laws were enacted to frustrate them. To evade the antimonopoly 
laws the trust was invented by Rockefeller’s lawyer, S. C. T. Dodd. 
When this was declared illegal, the holding company made its ap- 
pearance. The corporation to own corporations was adopted as the 
means of creating a monopoly without violating the Sherman Anti- 
trust Laws. But this too was outlawed in 1911. But by this time 
the work had been done. The dominance of the Standard was every- 
where recognized. Rockefeller’s fortune was the greatest in history. 
And he himself was retired. And then, singularly, the automobile 
and its voracious appetite for gasoline was driving the horse from 
the streets and creating the immense new industry of gasoline pro- 



duction, from which Rockefeller would make far more money in 
retirement than he ever made in all the years of exhausting industry 
during his busy life. 

These men, however, were making the pattern of the future 
America. The long, eloquent, bitter battles of liberals and radicals 
against the monopolistic practices of the great corporations and the 
trade associations would gradually lose their virility. Little by little 
great and powerful groups — including labor — would drop into the 
way of thinking that our economic society needed direction and 
control on the trade-association model — the plan used by Rockefel- 
ler first and discarded as unworkable. This is the central idea of 
the corporative system, which is the economic core of Fascism. It 
would not work for Rockefeller in 1872 because there was no 
means of enforcing compliance. It would not work for Franklin D. 
Roosevelt in 1933 because the government of a democratic society 
cannot possibly possess the ruthless powers that are necessary to 
enforcement. The corporative system can be made to work only 
under a dictatorship. It is in the direction of the Fascists’ corpo- 
rative system that our whole society tends. That tendency is based 
on the principle upon which Rockefeller worked in 1872 — the prin- 
ciple of control by either monopoly or agreement of the economic 
factors in society in the interest of profit. 

vi — — — — - 

What we have seen is the chart of the economic phase of the 
Rockefeller history. But mixed up with these economic threads 
were other strands that arose out of the struggle itself. These 
strands represented moral and ethical issues. They had to do with 
the methods Rockefeller used in pursuit of his objectives. And it 
was these that provoked those storms of protest and abuse that 
harried him for forty years. 

Rockefeller was remorseless in following out his plans. He knew 
he was in a war and that the little men in the oil regions would rend 
him apart unless he extinguished them. Whether or not Rockefeller 



was a cruel man we cannot say. But certainly he had that quality 
of the great commander engaged on large enterprises of survey- 
ing the necessities of his task with high intelligence and appraising 
the suffering of his victims in its proper proportion to the scene. 
He did not shrink from measures because smaller men were hurt. 
He told rivals whose refineries he coveted that they could have cash 
or Standard stock for their properties, that if they were wise they 
would take the Standard stock, that if they did they would be rich, 
but that if they refused to surrender they would be crushed, and he 
crushed them. He undersold them. He intrigued to cut their credit. 
He put obstacles in their way. He made profit impossible to them. 
And he did it without a flutter of the spirit as he knelt in the Euclid 
Avenue Baptist Church on Sunday. 

He used — though he did not invent — the system of rebates to 
crush rivals. That is, he made arrangements with the railroads to 
pay the published freight rates but got back secretly a large rebate 
on his freight bills, receiving as high as fifty per cent from some 
roads. The man who had to pay a dollar a barrel freight on his ship- 
ments could not contend with a competitor who shipped to the same 
point for fifty cents a barrel. What this meant to Rockefeller may 
be surmised from a report revealing that in the six months preced- 
ing March, 1879, the Standard shipped 18,556,000 barrels of oil 
on which it got an average rebate of over fifty-five cents, amount- 
ing to something over $10,000,000. Rockefeller defended the rebate 
on the principle of the quantity discount. Shipping in huge quanti- 
ties, requiring whole trains at times, and ensuring regular runs and 
economical handling of loading, the roads could perform the serv- 
ice for him more cheaply. The defense would be more valid if the 
quantity discount had been open to others who had large shipments. 
They were not, save in a few isolated instances. 

Far worse than the rebate was the drawback — an instrument of 
competitive cruelty almost unparalleled in industry. It amounted 
to this: the road allowed Rockefeller a rebate on his own ship- 
ments and paid him also a similar sum on his competitors’ ship- 
ments. The railroad paid rebates on competitor shipments but the 



rebate went to Rockefeller and not to the shipper. Thus, on every 
barrel a rival shipped, Rockefeller made a profit. In March, 1878, 
H. C. Ohlen shipped 29,876 barrels of oil to New York. Ohlen paid 
$1.20 a barrel freight. Rockefeller collected from the road twenty 
cents on each of these barrels — a squeeze of $5975 out of one rival 
in a single month. 

Rockefeller’s competitors long felt that some cruel and mortal 
force was killing them, but did not know what it was. When they 
discovered it, words cannot describe the fury of their hatred. 

A volume would be insufficient to outline the cases of men who 
ascribed their ruin to Rockefeller. Every incompetent who failed 
named Rockefeller as the cause of his failure. Ugly stories got wide 
currency. One example was that of Mrs. Backus, widow of an oil- 
man who told how she had appealed for assistance when her hus- 
band died and how Rockefeller had taken away her oil refinery at 
a third of its value. Miss Ida Tarbell gave much space to this case. 
No one can examine the facts without putting Mrs. Backus out of 

Another was the much-advertised case of the Merritts, who 
claimed they had been swindled out of the priceless ore fields on the 
Mesabi Range. There is plenty of evidence on this case since it 
dragged through the courts. It is not possible to scrutinize that evi- 
dence without conceding that Rockefeller’s conduct was without 
blemish throughout. The truth is that Rockefeller did not engage 
in what might be called personal perfidy. He was a patient, ruthless 
rival in business. He did not rob either his stockholders, his part- 
ners, or those with whom he dealt in personal relations. Those who 
came within the orbit of his competitive warfare got the full measure 
of the devices he had fabricated for their destruction. 

Having set out to corner the refining industry, he came after a 
while to the conclusion that he must control the pipelines, which 
were slowly supplanting the railroads as carriers of petroleum. Also 
he went into the distributing field as well. One of the most dramatic 
and critical battles of his career, in which he revealed the full 
measure of his genius as a commercial chieftain, was his struggle 



with the Empire Pipe Line backed by the powerful Pennsylvania 
Railroad. After Rockefeller had forced the Pennsylvania to sur- 
render, his prestige was so great that there was little energy left 
in the opposition to him. 

Having got the pipelines and the large distribution units, he used 
them effectively to knock out ambitious rivals. George Rice made a 
lifelong fight against the Standard. That story broke into the news- 
papers at regular intervals as a stain on Rockefeller’s name. Rice 
built a refinery at Macksburg, Ohio. Later he owned some wells 
there. Rockefeller hit him on the distribution front. The grocers 
were the retail outlets for kerosene. Grocers who carried Standard 
Oil were supplied with groceries at low prices in order to undersell 
those who dared to buy from Rice. Rice paid fifty cents a barrel 
freight to the railroad on his oil, the Standard paid twenty-five 
cents. On another road Rice paid thirty-five cents a barrel, the 
Standard paid twenty-five cents and collected ten cents on every 
barrel Rice shipped. Rockefeller ruined Rice, and in this case the 
evidence is complete against him. 

John D. Archbold, Henry H. Rogers, and the Standard’s local 
representative were indicted in Buffalo for blowing up the refinery 
of a competitor, Matthews. This was a grave charge indeed. Rogers 
and Archbold were acquitted. But the local manager was convicted 
and subjected to a grotesque fine of $2 50. Matthews sued the Stand- 
ard and got a settlement of $85,000. But that sum was consumed in 
lawyers’ fees and other costs. And Matthews was effectively ruined 
despite his settlement. 

Bribery of public officials and the press was part of the equip- 
ment of the great company as it rose to power. State and national 
laws, city ordinances stood in its way. It must march through them. 
It would buy up the mayor and common council of Bayonne as 
readily as the members of the New Jersey legislature or some of the 
most important statesmen in Washington. The Ohio legislature was 
bought up to defeat an early antitrust bill with such a display of 
cash that it went into Ohio history as the Coal Oil Legislature. The 
Standard backed Henry B. Payne for United States Senator from 



Ohio, and his son, Oliver H. Payne, treasurer of the Standard, sat 
at a desk in a Columbus hotel with stacks of bills in front of him, 
paying for votes on delivery. 

The company bought space and good will in newspapers. One in- 
vestigation revealed at least no Ohio papers had signed contracts 
to print editorials and news supplied by a Standard-supported 
agency in return for advertising. Some of the “copy” thus furnished 
makes strange reading today. 

Standard officials, including Rockefeller, did not hesitate to 
mount the witness stand and lie gallantly in defense of their proj- 
ects. In the Hepburn investigation Archbold denied on the stand 
that Standard controlled the Acme. Henry H. Rogers swore as a 
witness in court that he did not know who controlled the United 
Pipe Lines, though, of course, he knew the Standard did so. Rocke- 
feller himself swore that he was not interested in gas and copper, 
though the Standard owned a dozen subsidiary corporations that 
produced natural gas, while Rogers and Stillman and William 
Rockefeller gathered up dozens of gas companies that bought their 
oil from Standard. When they could not lie with safety they took 
refuge in refusals to answer, which led to the most grotesque per- 
formances. Jabez Bostwick refused to state his name on the wit- 
ness stand on the ground that it “might incriminate him.” 

Most famous — or infamous — of the corrupt performances of 
Standard Oil was carried on in an episode that became notorious as 
the “Archbold letters.” William Randolph Hearst got possession 
of a packet of letters and copies of letters stolen by an office mes- 
senger from Archbold’s files. They revealed Archbold as the arch- 
corruptionist of the company, sending checks and certificates of 
deposit to various Congressmen and judges and to such distin- 
guished Senators as Joseph B. Foraker of Ohio and Joseph Bailey 
of Texas and to Matthew Stanley Quay. This made a long and 
shocking story when it broke upon the country as a sensation and 
ruined all of the public men it touched. Actual proof that the Stand- 
ard vice-president sent a series of checks ranging from $5000 tc 
$ 1 5,000 and totaling $44,000 in six months to a great Senate leader 



shocked the public. These revelations quickened the pace at which 
state legislatures, public prosecutors, political groups, and the na- 
tional government pursued the Standard. Investigation followed in- 
vestigation. Subpoena servers shadowed Rockefeller. In the end, at 
the direction of Theodore Roosevelt, the Attorney General brought 
suit to dissolve the Standard Oil holding company as a monopoly. 
This suit ended in the famous dissolution decree of 191 1, which did 
break up the company into its component corporations, while at 
the same time the decision contained elements — the famous “rule 
of reason” — that so weakened the antitrust laws that they were 
effectively reduced as a fortress against the onward march of cor- 
porate restraints on trade. 

When the Standard holding company was dissolved it owned 
thirty-three corporations, and John D. Rockefeller personally 
owned something more than one fourth of all the stock. What it 
was worth, it is difficult to say. The shares when first sold on the 
market immediately following the dissolution were valued at 
$663,000,000. Four months later they had risen to $885,000,000. 
They were probably worth still more. For the Standard had never 
made any effort to inflate its values. Whatever may be said of 
Rockefeller’s fortune it was never made in stock adventures in 
Standard shares. The shares of that company were never peddled 
about. They formed the subject of no market operations. Rockefel- 
ler issued no bales of stock to be listed on the exchange, manipulated 
to higher levels, and then unloaded on the public. This was the 
method that Morgan employed and that later became the curse of 
American corporate business. No stockholder ever had any reason 
to complain against Rockefeller. As for consumers, he did strive 
to make the best oil and to furnish unequaled service. He was the 
best employer of his time, instituting hospitalization and retire- 
ment pensions. He paid the best wages in the industry. His sins 
were the sins of the industrial warrior, the sins of the ruthless com- 
petitor. His offenses were leveled against those who dared to sell 
oil in an oil world that this great monopolist had marked for his 




When he retired, the Standard Oil Company was the greatest 
industrial corporation in the world. Its tanks were to be seen not 
only at every railroad station in America but along the Ganges, the 
Yangtze, and the Amazon, wherever boats or pipes or railroads or 
wagon wheels could carry his oil. 

The precise period of Rockefeller’s retirement always remained a 
mystery. As a matter of fact, it is of more than passing interest that 
this man, reputed the most omnivorous money getter in history, re- 
tired from active business when he was fifty-four. Stories of his 
broken health fascinated the public mind. People hated him cor- 
dially and told stories of priceless irony about the world’s richest 
man who had snatched the bread from the mouths of his little com- 
petitors only to find himself unable to eat a square meal. It was said 
he had a standing offer of a million dollars to any doctor who could 
heal his inhospitable stomach. Rockefeller himself always denied 
the stories of his illness. The truth seems to be that his stomach had 
become seriously affected by the long, cruel strain that business, 
the pursuit of the law, and public odium had put upon it. His physi- 
cian demanded that he relax his labors. In 1896 he complied. He 
remained president of the company, but withdrew from any daily 
or direct supervision of its affairs. He was worth, at this point, prob- 
ably $200,000,000. But as he withdrew into the leisure of Tarry- 
town, patents were being taken out on the first simple automobile 
designs that, perfected later, changed the oil business from a kero- 
sene to a gasoline industry, multiplying many times over the opera- 
tions and profits of his companies. There did come a time, doubtless, 
when Rockefeller’s fortune could have been estimated at a billion 

After 1896 he planned to devote himself chiefly to the recovery 
of his health and the administration of his fortune in the interest 
of his philanthropies. And this he did until 1911, after the dissolu- 
tion decree, when he separated himself entirely from all further 
connection with the immense industry. 

Rockefeller must be recognized as perhaps the most constructive 
philanthropist in the history of America at least. How far this was 



Rockefeller’s own conception and how far it was the plan of his 
almoner, Dr. Frederick T. Gates, who acted as the director of his 
charities for many years, it is not possible to say. Rockefeller had 
begun his benefactions by donations for churches, hospitals, 
schools, seemingly good causes that came to his attention. But in 
time he developed a theory of giving to which he adhered to the 
end. This is best expressed by saying that Rockefeller became in- 
terested in agencies to study and prevent disease rather than in hos- 
pitals to treat its victims. He came to feel that human pity was a 
very active agent and could be relied on to provide hospitals after 
suffering men and women were stricken, but that it was of infinitely 
greater importance to find the seeds of disease and keep the patients 
out of the hospitals. This idea ran through all his subsequent phi- 
lanthropies, whether in the field of science, business, or education. 

When he founded the University of Chicago he was still the 
zealous Baptist. Before he was through he gave altogether $45,- 
000,000 to that institution. By 1928 the total of his gifts was as 

Rockefeller Foundation and Laura Spelman Memorial 

General Education Board 

Medical Institute 

University of Chicago 


by John D. Rockefeller, Jr. 







Total $574,155,729.30 

This, of course, does not represent what the public has received 
from his gifts. Thus, he gave the Rockefeller Foundation $182 ,000,- 
000, but that Foundation out of its yearly revenues gave the public 
$141,000,000 in gifts between 1922 and 1928. 


Rockefeller must be accepted as the greatest business adminis- 
trator America has produced. His immense wealth was the product 



of intense application to the business of accumulation, to the habit 
of planning with infinite patience and then executing these plans 
with indomitable fortitude, cautiously and slowly when possible, 
with militarylike swiftness when necessary. Unlike Morgan, he was 
in no sense the scowling autocrat. Rockefeller possessed an extra- 
ordinary capacity for acting with others. He made it a rule never 
to adopt a decision on any important matter unless he had the unan- 
imous consent of his partners. He could spend years trying to con- 
vince them when his simple word would have been law. His fortune 
belongs in the group of the Carnegies, the Henry Fords — enterpris- 
ers who were producers and who got their fortunes by creating 
wealth and retaining for themselves as large a share of it as they 
could. They were wholly different from the group that included 
Morgan, Gould, and Henry H. Rogers, Rockefeller’s partner. 
These were primarily speculators and gamblers, who insinuated 
themselves into industries created by other men, converted the 
ownership of those industries into liquid securities, and made money 
from the market changes in those securities. Rockefeller, Carnegie, 
Vanderbilt, many of the old railroad builders — whatever their other 
faults might be — left behind them great industries and great rail- 
road empires. 

Perhaps one of the most interesting features of Rockefeller’s 
career was the length of his life. It was a planned life — in all things 
down to the last detail. When his stomach became affected in the 
’nineties and the alarm became obvious, he proceeded to devote to 
the business of living the same meticulous planning he had brought 
to bear on the business of getting. Rockefeller, older than most of 
his colleagues, marked for the grave in mid-life by a public that 
hated him, actually outlived them all. He died on May 23, 1937, at 
the age of ninety-eight. The great fortune had been put either into 
the huge endowments already named or made over in some way to 
his family, chiefly his son, who administers it largely as a philan- 
thropic enterprise. That portion retained by Rockefeller himself 
until his death amounted to $26,273,845,25. It included only one 
share of Standard Oil stock, valued at $43.94. 


J. Pierpont Morgan 



There can be no doubt that the two most considerable figures in 
the world of business in their time, if not in any time, were John D. 
Rockefeller and J. Pierpont Morgan. Rockefeller was pre-emi- 
nently the richest man of his day. Morgan would have to be 
left out of this volume if the size of his fortune alone were consid- 
ered. There were many men during his life, as well as before and 
after, who were worth more than twice as much. But no man, either 
before or since, left upon the great art of money getting so impor- 
tant an influence. 

These two business titans were essentially different. They were 
alike only in that both loved to sing hymns, both turned in their 
righteousness to the God of Zion, both loved to keep books, and 
both loved money. But they were wholly different in all things else. 
Morgan was the splendid Christian potentate; Rockefeller the 
humble parochial Sunday-school teacher. One was the pious, ab- 
stemious Baptist; the other the zestful user of all that the Giver 
of All Good Things bestowed upon his chosen people of the Epis- 
copalian persuasion. Morgan was the brusque, irascible, arrogant, 
and terrifying autocrat; Rockefeller the most patient of collab- 
orators. Rockefeller husbanded with miserly prudence the last 
ounce of health according to the best scientific counsel; Morgan, 
like another great citizen of Hartford, Mark Twain, attained to the 
age of seventy-six by violating all the laws of health. But at that 
Rockefeller, who outstripped him in wealth by many hundreds of 
millions, outlived him by twenty years. Most important, of course, 



J . P. Morgan 



Rockefeller was a creator of industries, a producer of wealth, and, 
beyond doubt, the most constructive philanthropist in our history. 
Morgan created no industries, produced very little wealth. He 
fastened himself upon the industries that other men created and 
learned the trick of sharing their wealth with other men. How much 
Rockefeller advanced or impaired the development of a sound eco- 
nomic life remains yet a subject of debate. But it is probable that 
no man in our history inflicted upon our economic system a deeper 
and more destructive wound than J. Pierpont Morgan. 

It is not easy to disentangle the Morgan of flesh and blood from 
the Morgan of the biographers. According to one, he was an example 
of moral excellence, singing the old hymns his mother taught him, 
fraternizing with bishops, forgiving his enemies, loving those who 
hated him, visiting sick friends and going sorrowfully to their fu- 
nerals, bouncing his grandchildren on his knees, and molding his 
numerous corporate reorganizations for the good of the country. 
Another sees him as the embodiment of all the seven deadly sins 
save sloth, alternating his episcopal confabs with visits to his mis- 
tresses, building parish houses for the dominies and theaters for the 
ladies, wrecking his rivals ruthlessly, and grasping with unex- 
ampled arrogance after money and power. 

The man was magnificently endowed to play the role of financial 
imperator. There was the necessary bulk of bone and flesh. He was 
six feet tall, weighed two hundred pounds. Standing with feet apart, 
looking forward, he seemed poised to make a formidable advance. 
His head was large, craglike, well poised on his broad shoulders, 
his countenance rough-hewn. The upper lip, even as a boy, was 
heavy, and as he grew older, hidden behind his unruly mustache, 
it gave to his face an aspect of cruelty. His powerful jaws and rugged 
brow were drawn down in an imperious scowl. His bulbous nose 
accentuated the dark aspect of his visage. His large, wide-opened 
hazel eyes bent upon a visitor or suppliant with terrifying attentive- 
ness and made him a formidable man in conference. Whoever met 
him came away to talk about the impression of energy and power. 
He possessed what might be called psychic power and majesty — 



those ectoplasmic tentacles that grappled people and held them 
helpless in his presence. Charles Mellen, New Haven railroad presi- 
dent, a Morgan satrap, confessed to a Senate committee that he 
stood in awe of Morgan, that when Morgan told him he was wrong, 
so vast was his respect for Morgan that he knew Morgan was right 
nine times out of ten. Morgan did not have by any means the in- 
tellectual endowment of the small ratlike Gould or the astute and 
realistic Harriman. But he had what none of them had, the Jovian 
mood, the principle of personal force, the imperial bearing that 
overawed and quelled opponents. 

He was never a scholar. He collected first editions and man- 
uscripts but read few of them. For years they were put away in a 
basement room so filled with such treasures that one could scarcely 
get in or out or find anything. But he was a wizard at figures. As 
a boy in high school his teacher said he was little short of a prodigy 
and could solve mentally problems in cubic root and numerous 
decimals. He could speak French and German because he had spent 
two years in a French school in Switzerland and two at the Uni- 
versity of Gottingen. But he had no use for the classics. He could 
express himself in written English in a clear, direct, and vigorous 
style. Furthermore, even as a youth, he could put these excellent 
sentences down in a hand of great neatness and symmetry. 

He had little understanding of music. He never went to a con- 
cert if he could avoid it. He occasionally attended an opera — he 
had a box — usually on the first night, thus beginning and ending 
the opera season. His taste in music did not rise above the hymns 
he had learned as a boy. He loved to sing them. His family insisted 
he could not follow any tune, even Yankee Doodle, but this judg- 
ment he indignantly protested. 

His favorite hymn was Blessed Be the Tie that Binds, not an in- 
appropriate sentiment for the master combiner. But he liked others 
— Jesus, Lover of My Soul and I Need Thee Every Hour — a phrase 
that became famous as a trade slogan of one of the pre-Volstead 
whiskies. He liked that one so much that he persuaded the moguls 
of Episcopalian music to admit it to their polite hymnal. He tried 



also to force in some old nonconformist Scottish religious ballad 
he liked, but even the great Pierpont Morgan could not get this bar- 
barian religious folk song into the hymnal of God’s elite. 

Throughout his life Morgan was an inveterate churchgoer. 
Rockefeller himself was not more faithful. He went to church at 
least once on Sundays and frequently twice. On shipboard he never 
missed divine service. He was a vestryman of St. George’s Church, 
where, on Sunday, God enjoyed the inexpressible privilege of be- 
holding many proud millionaire heads bowed in humility and 
prayer. He was also a vestryman of the little church near Cragston, 
his country estate — the Highland Falls Church of the Innocents. 
Its name, of course, had no relation to the swarms of investors who 
bought the stream of securities that issued from the offices at Broad 
and Wall. He was a faithful and active participant in the temporal 
affairs of both institutions. 

He had a fondness for bishops, who, indeed, were among his hob- 
bies. In his youth one of his first adventures in collecting was bish- 
ops’ autographs — Episcopal bishops only, of course. In later life 
he collected the bishops themselves. Bishops of the Episcopal 
Church are good company. They are cultivated men with a fondness 
for the good life. They do not eschew vintage wines and French 
viands like so many of the evangelical brethren. He counted many 
friends among them. He was for years a lay delegate to the triennial 
conventions of the Episcopal Church. 

At those gatherings he appeared surrounded by that magnificence 
that followed him everywhere and that recalls the appearance of the 
great banker he resembled most — Jacob Fugger — at the Congress 
of Vienna. At Minneapolis he leased a large residence and sent Louis 
Sherry, the famous caterer, ahead, with a flock of waiters, to prepare 
the entertainment for the bishops. At San Francisco he leased the 
Crocker mansion; the inevitable Louis Sherry assumed command of 
the arrangements, and all trains between New York and San Fran- 
cisco were sidetracked to permit the Morgan special and its cargo 
of bishops to whiz to the coast without stop. At Richmond he took 
over the Rutherford House, added an additional bathroom, recar- 



peted the stairs, organized it under Sherry as major-domo for sev- 
eral weeks, and housed a flock of Episcopal guests and their wives. 

These Morgan headquarters were referred to half humorously, 
half critically as Syndicate House. These triennial gatherings, which 
usually included a number of multimillionaires among the lay 
delegates, were sumptuary displays. A hotel proprietor, after one of 
these conventions, said that, though he had entertained business, 
sporting, and social gatherings of many sorts, he had never seen 
men spend so much money or women flaunt so much jewelry as 
these Episcopal delegates and their consorts. 

In 1875 Morgan appeared as one of the sponsors of a Moody 
and Sankey revival. It was held in the old New York, New Haven 
& Hartford depot. Morgan took his family frequently to the meet- 
ings, sat on the platform, and joined lustily in the hymn singing. At 
the other end of the religious spectrum he served for a dozen years 
as the treasurer of the Cathedral of St. John the Divine and took an 
active part in organizing and managing its finances. 

Morgan was orthodox in everything. The world he lived in was 
suited to his tastes, particularly after he had fixed it over upon its 
industrial front. He would doubtless have answered as his bosom 
friend, George F. Baker, did when asked by a Senatorial inquisitor 
if he did not think the world was all right as it was, and replied, 
“Pretty nearly.” God was a part of it; had always been; served a 
most useful purpose, helped to answer a lot of questions he had 
neither the time nor the taste to bother with. And so he accepted 
God as he did the institution of property and money and the 
church his parents had reared him in where he found the very 
best people. He was a believer in order and was deeply convinced 
that sin was a luxury that the poor could not be entrusted with. He 
was one of a group of righteous men like himself who sponsored 
that mighty policeman of the Lord, Anthony Comstock, in the 
organization of the Society for the Suppression of Vice. 

He was superlatively choosy about his friends. Even as a boy 
in school he mixed with but few. But he was deeply devoted to them 
as well as to his family — his parents particularly. From the time he 



returned to America from school at Gottingen in 1857 to 1890, 
when his father died in Europe, he never let a ship leave for Eng- 
land without writing him a letter. Often he had to write these let- 
ters late at night after the rush of the day’s work. His father pre- 
served them in a series of books in his library. Twenty years after 
his father died, Morgan, looking through them, put them into the 
furnace. That was in 1911, a year of magnate hunting. He was 
growing old, and these letters were full of news, comments, opin- 
ions on the events and men of his time. 

During his business life he was never a student. He turned for 
relaxation to his hobbies of which he had many. During the horse 
and buggy era he liked a pair of trotters. He was fond of dogs — at 
least of breeding dogs. His collies were famous. He kept about fifty 
at Cragston. He would go for a horseback ride over the country with 
fifty scampering, yelping animals at his heels — a spectacle to make 
the peasants stare. It was the Morgan version of taking the dog 
around the block. But most of all he loved boats. There was a suc- 
cession of Corsairs, which expanded their length and beam as Mr. 
Morgan’s beam as a banker broadened — first a small launch, then 
Corsair I, a long, low-hung rakish schooner, then Corsair II, a 
handsome ocean-going yacht that was taken over by the government 
as the U.S.S. Gloucester in the Spanish- American War; then Cor- 
sair III, a magnificent two-hundred-foot vessel upon which he sailed 
the seven seas and aboard which, tied up at port for long stretches, 
he would live and entertain. He was Commodore of the New York 
Yacht Club, and, in 1901, built the Columbia which raced against 
Thomas Lipton’s first Shamrock for the America’s Cup. 

But most splendid of his hobbies was the collection of almost 
everything under the sun. He was a congenital collector. As a boy 
in school and in college he began by collecting pieces of broken 
stained glass, picked up around old European church ruins. When 
he left Gottingen for America he brought with him a couple of bar- 
rels of glass fragments which he later used to make a window or two 
in his beautiful library. He collected paintings — many of the 
greatest ever created — statuary, wood, bronze, stone antiquities, 



miniatures, cameos, etchings, first editions, original manuscripts, 
tapestries, brocades, cuniform tablets, ancient coins, medallions, 
vestments. Nobody has brought together such an accumulation of 
the original manuscripts of the great writers of all time as Mr. 
Morgan. In his later years he amused himself making catalogues of 
these treasures. The catalogues alone, magnificently illustrated in 
colors, cost a fortune. The size and importance of these collections 
may be seen from the fact that one catalogue of mere odds and 
ends ran to 157 pages. 

Morgan gathered up these things because he liked collecting. But 
beyond a doubt the hobby contributed to the nourishment of his 
ego. It was part of another trait tucked away neatly amidst his 
other psychological equipment. It was one of his own partners 
who said: 

Mr. Morgan is not a conscious advertiser, but he has a conscious genius 
for advertising, that is for getting on the first pages of newspapers. Many 
other men buy pictures and horses and keep yachts and go into public 
enterprises ; but when he buys, it is always prize-winning horses or dogs 
or celebrated pictures and he has the finest steam yacht afloat and solely 
and individually owns the cup defender. He starts the building of the 
New York cathedral — the biggest church in the country. He heads the 
syndicate that built the largest and most beautiful covered arena (Madi- 
son Square Garden), the largest and finest opera (the Metropolitan) 
and the best situated and most beautiful club house (the Metropolitan 
Club) and makes the first subscription to every public object . 1 

Certainly he set the scenes amid which he moved for his stu- 
pendous act. His home at 219 Madison Avenue, his town house in 
London — Prince’s Gate — were filled with priceless treasures. He 
had a fine estate at Cragston in upper New York and another on 
Long Island. He inherited from his father his country home in 
England, Dover House. He had two shooting lodges, a fishing camp, 
a winter resort on Jekyl Island, while Corsair II was a sort of float- 
ing home that connected all the others. The world was filled with the 
fame of his wealth, his art treasures, his power. Monarchs received 

1 J. Pierpont Morgan , an Intimate Portrait, by Herbert L. Satterlee, Macmillan, 
1939 . 



him with delight and even their flunkies looked at him with awe. 
Leopold of Belgium consulted him upon his personal investment 
problems. Edward VII visited him at Prince’s Gate and Dover 
House. Kaiser Wilhelm II came aboard his Corsair and lunched with 
him. The Pope honored him. 

Everywhere crowds fought for a peep at him. In New York dur- 
ing the 1907 crisis, when he sat like an archangel in the midst of the 
whirlwind, directing the storm, people ran along beside his cab or 
brougham to look in at him. In Rome crowds gathered outside the 
Grand Hotel to see the American “King” to whom the art dealers 
flocked with the masterpieces of Europe. In London, where he had 
tried to grab the bus lines and finance a subway, peddlers sold upon 
the streets little discs to be worn on the coat bearing the legend 
license to stay on the earth, and signed j. p. Morgan. Admir- 
ing bishops conferred upon him the title of J. Pierpontifex Maxi- 
mus. In Rome he was called The Magnificent. 

Self-sufficient, arrogant by nature, all this power and acclaim, 
we may be sure, did not diminish his arrogance. One of his biog- 
raphers, infected with what Macaulay called the Leus Boswelliana, 
or disease of admiration, has described how he walked through 
crowded Wall Street. He did not dodge or zigzag or slacken his pace 
to accommodate himself to the presence of others. He barged along, 
as if he were the only man on the street, the embodiment of power 
and purpose. Thus he moved through the world. He walked as if he 
owned its highways. If there were others blocking his path and 
designs, he moved as if he were preceded by Roark Bradford’s 
Gabriel crying: “Make way! Make way, for the Lord God 


Morgan, being a royal figure, it has seemed necessary to his bi- 
ographers to provide him with an aristocratic lineage. The first 
Morgan to arrive on this continent from England was Miles, who 
landed at Boston and shortly afterward went to some unclaimed 



acres on the site of what was one day to be Springfield, Massachu- 
setts. “He spent a large part of his life/ 7 says a member of the Mor- 
gan family in his life of the great man, “serving the community in 
which he lived and took his share of fighting. His services in helping 
lay the foundations of the Massachusetts Commonwealth were pub- 
licly recognized in 1879 when a statue was erected to his memory 
in Court Square , Springfield, where it stands today to be seen by all 
who motor by. 77 2 

The implication — nay the assertion — is that the people of Spring- 
field thus honored the services of one of their founding fathers. 
There in Court Square, sure enough, stands Miles in bronze. But 
there also upon the pedestal is chiseled the information that the 
statue was erected, not by the public, but “one of his descendants of 
the fifth generation 77 — probably J, P/s father. 

Farmer Miles was succeeded by three generations of Josephs. 
Joseph Morgan Number One was a weaver. Number Two was a 
farmer. Number Three was a tavernkeeper. All were doubtless 
thrifty and honest peasants — though Joseph Number Two served 
as a captain in the Revolutionary army. Number Three was the 
grandfather of J. Pierpont Morgan. He moved to Hartford and 
opened the Exchange Coffee House. But he expanded in time into 
something more than a dispenser of grog and victuals. He became a 
hotelkeeper; owned the City Hotel in Hartford and the New Haven 
House in New Haven. He accumulated a moderate fortune as a 
moneylender and real-estate investor and became interested in and 
a director of the then small Aetna Fire Insurance Company. Here 
was a stream of good, decent blood, but this series of ancestors 
hardly answers to the definition of aristocracy which means in its 
broadest connotation a “class of persons pre-eminent by reason of 
birth, wealth, and culture. 77 

Junius Morgan was the son of this last Joseph. He was born in 
Hartford in 1809, worked on his father’s farm, went to a good 
boarding school, and with his father’s aid became a partner in a 
wholesale drygoods store in Hartford — Howe, Mather & Co. Later 

2 J. Pierpont Morgan, an Intimate Portrait . 



he moved to Boston to become a partner in a larger firm of mer- 
chants, J. M. Beebe, Morgan & Company. This Junius Morgan 
was a man of great ability, who later moved to London as a partner 
of the famous George Peabody, the American who became a lead- 
ing English banker. And when Peabody retired, Junius Morgan 
established his own banking house in London, where he continued 
to live and grow wealthy for the rest of his life. This was the father 
of J. Pierpont Morgan. 

There was another ancestor of a very different breed — Morgan’s 
maternal grandfather, John Pierpont. What schoolboy has not re- 
cited Warren’s address: 

Stand! The ground is yours my braves; 

Will ye give it up to slaves? 

John Pierpont, poet, preacher, reformer, friend of William Lloyd 
Garrison, wrote this recitation. He thundered against slavery. He 
was so far different from Junius Morgan and his father Joseph that, 
in his own words, his interest “was in the great breathing mass of 

In the old Hollis Congregationalist Church in Boston John Pier- 
pont struck at so many kinds of human injustice that he irked the 
fastidious members of his congregation. Offended by his abolitionist 
views, some of them took advantage of his use of the word “whore” 
to brand him as immoral and call for his resignation. He resisted, 
demanded a trial, got one, was vindicated, and then resigned. He 
died at the age of eighty, the occupant of a small government office 
in Washington. 

Here, united in the great banker Pierpont was good blood, but 
what different streams — the cold, Yankee, money-loving blood of 
the Morgans and the hot, rebellious blood of the old patriot re- 
former. There is, however, nothing odd about the fact that it was 
not to John Pierpont or even to Joseph Morgan, the Revolutionary 
soldier, that a statue was built, but to the farmer and sergeant of 
militia, Miles, in order to exhibit the “antiquity” of the Morgan 
line. Humble Miles was one of those ancestors who shine in the 



reflected glory of their descendants. If it were possible it was he 
who ought to have erected a statue to his descendant, Pip Morgan. 

J. Pierpont Morgan was born April 17, 1837, in Hartford, two 
years before John D. Rockefeller. The day of his birth all of the 
banks in New York suspended specie payment. The next day those 
of Hartford followed suit. The future money king came into the 
world amid the din of crashing banks. He was baptized in the 
Congregationalist Church in Boston by John Pierpont and was 
called John Pierpont Morgan. No stranger monument could have 
been dedicated to the old battler of the Lord interested “in the 
great breathing mass of humanity.” 

It is difficult to depict Morgan’s youth and young manhood to 
those who hold to the hero-villain theory of history. To millions 
he was and remains the image of the unfeeling despot. Because he 
was the central figure in so many episodes as the vicegerent of 
the Money Devil, it is not an easy matter for the black-white the- 
orists of human nature to credit the softer elements of his nature. 
The political leader charged with stealing public funds, robbing 
ballot boxes, slugging rival candidates, and consorting with crim- 
inals is set down by those who do not know him personally as a 
sort of monster. But, on the other hand, those who know him and 
can testify that he is a devoted father, a loyal friend, and a gen- 
erous neighbor find it equally difficult to believe that he is a 
grafter and gangster. 

Those who believe the black patches in a man’s character are 
prepared to call him black; while those who are familiar with the 
white patches only are unwilling to believe there are any black 
ones. Prove that the district leader gives coal to the poor and wor- 
ships his little daughter and you acquit him of robbing the public 
till. If Morgan venerated his father, lavished loving attention upon 
the purchase of a little bonnet for his mother, wept at singing the 
songs she taught him, folded an old schoolmate like General Joe 
Wheeler to his bosom, lifting him from the floor in an exuberant 
hug — then there was no water in U. S. Steel and the crime against 
the New Haven road is a fiction. It is almost impossible to establish 



in the popular mind the perfectly simple truth that a man may rob 
a railroad or pad a security issue or crush a business rival without 
being a monster. 

Morgan seems to have had a very engaging youth. He did not 
go to school until he was nine years old. He went, in order, to the 
Point School, the Episcopal Academy in Hartford, the Pavillion 
School in Cheshire — a boarding academy — and three years later 
to the Public High School in Hartford. 

In 1851 his father moved the family to Boston, where he be- 
came a partner in J. M. Beebe, Morgan & Company. And Pierpont 
was entered in the English High School where, a biographer ob- 
serves, there was not to be found a single name of Irish, Italian, 
German, or any other nationality save English (unless we except 
Delano) . There was nothing to poison the mind of the pure-blooded 
young American. 

Two years later came the offer to Junius Morgan to join George 
Peabody in London. He accepted. European funds were moving in 
abundance into investment in the growing young continent.